Strong demand for Kexim euro bonds

The print achieved the lowest coupon and spread for Korean euro bond issuers, highlighted by strong support from central banks, sovereign wealth funds and SSAs

One of South Korea’s major policy banks, Export-Import Bank of Korea (Kexim), on March 18 priced a 750-million-euro (US$852.30 million) senior unsecured bond, becoming the first Korean issuer to access this market in 2019.

The Reg S five-year issue was priced at 99.823% with a coupon of 0.375%, representing a spread of 32bp over mid-swap. This was the lowest coupon and the lowest spread ever achieved by a Korean issuer in the euro bond market for a five-year offering.

The spread was even tighter than the final price guidance of between 35bp and 40bp over mid-swap, which came on the back of a strong order book amounting to 1.9 billion euros.

Following the mandate announcement in the early Asia afternoon of March 18, the deal was launched just after the European markets opened on the same day, with an initial price guidance of between 45bp and 50bp over mid-swap. The transaction gained immediate traction from investors with demand reaching over 1.5 billion euros by 10am London time.

With significant orders coming from key institutional accounts, Kexim was able to revise the price guidance to between 35bp and 40bp, eventually printing the deal through the range at 32bp over mid-swap.

Kexim previously tapped the euro bond market in July 2018 with a similar 750 million euro offering and tenor of five years, as it took advantage of market liquidity and a favourable swap condition. The bonds carried a higher coupon of 0.625%, which was equivalent to a spread of 43bp over mid-swap.

About 120 accounts contributed to the final order book of 1.9 billion euros on the latest deal with 46% of the bonds distributed in EMEA countries, 12% in Switzerland, 11% in Benelux, 8% in France, 8% in Germany, 8% in Asia and 7% in the UK.

By type of investors, 44% of the bonds were sold to central banks, sovereign wealth funds and SSAs (sovereigns, supranationals and agencies), 28% to banks, 20% to asset managers and 8% to insurance companies and other investors.

The strong participation of sovereign wealth funds, agencies and central banks in the transaction was a manifestation of Kexim’s robust credit story amid the tightening of Korea’s credit default swap (CDS) since the beginning of the year.

J.P. Morgan, Societe Generale, Standard Chartered and UBS acted as the joint bookrunners for the transaction.

As one of Asia’s most prolific issuers, Kexim accesses different pools of liquidity to meet its funding requirements. In 2018, in addition to euro and US dollar bond markets, it also tapped, among others, the Australian dollar, Samurai, Swiss franc, CNH Formosa and US dollar Formosa bond markets.

In December, it became the first Korean financial institution to issue sustainable development goals (SDG) bonds amounting to 350 billion won (US$310 million).

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