South Korea's automaker Kia Corporation on April 12 priced its first-ever green bond offering in the international debt capital markets amounting to US$700 million. The dual-tranche transaction also marked the company’s return to the US dollar bond market since 2017.
The Reg S/144A deal included a three-year fixed rate bond amounting to US$300 million, which was priced at 99.691% with a coupon of 1% to offer a yield of 1.105%. This represented a spread of 75bp over the US treasuries, which was in line with the final price guidance and 35bp inside the initial price range of 110bp area. The other tranche was a 5.5-year fixed rate bond, which was priced at 99.797% with a coupon of 1.75% and a re-offer yield of 1.789%. This was equivalent to a spread of 90bp over the US treasuries, which was also in line with the final price guidance and 35bp tighter than the initial price guidance of 125bp area.
The deal attracted a combined order book of US$4.95 billion, with the three-year bond garnering a total demand in excess of US$2.65 billion from 140 accounts. In terms of geographical distribution, 51% of the bonds were sold in the United States, 32% in Asia and 17% in EMEA. By type of investors, asset and fund managers accounted for 84%, while insurance companies and pension funds took 9%, and banks and private banks 7%.
The 5.5-year bond generated an order book of more than US$2.3 billion from 149 accounts with 65% of the paper distributed in Asia, 18% in EMEA and 17% in the US. Asset and fund managers again drove this part of the transaction as they bought 82%, followed by banks and private banks with 11%, and insurance companies and pension funds 7%.
Kia’s green bond offering is linked to the company’s "Plan S", where the S stands for "shift", part of its future business strategy to achieve a pre-emptive transition to electric vehicles. It established a green finance framework in March 2021, satisfied the International Capital Market Association (ICMA) guidelines and obtained an external review from DNV, a leading global provider of environmental, social and governance (ESG) research and analysis.
Proceeds from the transaction will be used to finance or refinance new and/or existing eligible green project categories as described in the green finance framework. BofA Securities, Citi, HSBC and Standard Chartered acted as the joint bookrunners and lead managers for the deal.
The transaction was priced about a week after Kia and its parent Hyundai Motor Company had their rating outlook revised from negative to stable by Fitch Ratings, reflecting the companies’ resilient 2020 performance and that they will sustain their improved profitability.
Kia previously issued a dual-tranche US dollar bonds in 2017 totalling US$900 million.