If the company proceeds with a yen denominated bond issue, which could be either a euroyen, a Samurai or a global yen deal, it would aim to reach a maturity of up to five years and launch the deal by April, said the banker. With the 10 year interest rate at such low levels, longer tenor deals have lost favour with Japanese investors.
The company is intending to use the proceeds from the bond to refinance maturing foreign currency bonds, said the banker. Most of Kepco's revenues are in Korean won, and the firm, as a consequence, has been seeking to reduce its exposure to foreign currency debt in order to avoid foreign exchange risk. However, Kepco is intending to maintain some exposure in the foreign currency markets and the superior financing conditions of the yen market make it a more attractive prospect than dollar denominated financing.
The deal would follow a ¥30bn five year euroyen issue that the company arranged in July 2000. Merrill Lynch and UBS Warburg joint lead managed that transaction, which offers a coupon of 2.7% and was priced at par.
Before that, the company had issued a $300m 8.25% bond for four years and nine months, which Deutsche Bank sole lead managed. That transaction was priced at 190bp over US Treasuries.
British Telecom (BT) could also be a Samurai bond issuer in the coming months, having filed a shelf registration for ¥500bn in February. But the telecoms company denied any plans to arrange a specific deal, and bankers said that given BT's recent rating outlook downgrade and the imminent end of the fiscal year, the timing for a new issue does not look ideal.