Rating: Baa2/BBB
Amount: Sfr150m
Maturity: 16 July 2015
Issue price: 100.276
Coupon: 3%
Spread at re-offer: 170bp over mid-swaps
Launched: Thursday 17 June
Payment date: July 16
Bookrunners: BNP Paribas, Deutsche Bank
Bookrunners’ comments:
BNP — This was Hyundai Capital’s inaugural transaction, coming after their roadshow a couple of months back. We just had to decide when it was the best time to pull the trigger. We’ve had several Korean names in the Swiss market, such as Kexim or KDB, which are more or less government related.
This was a very different story and very much driven by the coupon — 3% and five years makes a very strong story in the Swiss market at the moment. It lets investors get something out of the credit.
Geopolitical concerns were not really an issue for investors. Worries about North Korea return every so often, but it hasn’t been a great problem for this issue.
Deutsche Bank — There were a few trades on the table today, but this was certainly one of the more exciting: 3% was an interesting coupon for any investor, so 3% and five years was very appealing, and we had overwhelming interest in buying this deal.
We soft-sounded this a few days ago, and as the swap market looked like it was in good shape, we confirmed our IOIs in the morning and went for it. We had soft-sounded at 180bp over swaps, and entered bookbuilding at 175bp over. At that level, the orders came in quickly.
The deal needed approval from the South Korean finance ministry, so the size was effectively capped at Sfr150m. The book was full in less than an hour, and we felt able to tighten further, to 170bp. We didn’t lose orders at 170bp — but allocation was difficult with the books being more than two times covered.
Market appraisal:
"...everyone was expecting more, but the size was capped. Demand was much higher, probably driven by the 3% coupon."
"...as another corporate, Hyundai is more cyclical than Deutsche Telekom, and a more risky name, but the issue size was limited, which helped."
"...North Korea does create a little geo-political risk, but I don’t know how much one should account for that in the price."
"...this is part-financial, part-auto maker, both of which have suffered in the crisis."
"...General Electric Capital are involved, with around 43% of shares, which gives investors more confidence.