Hana Bank is no stranger to navigating turbulent market conditions. In January, the Korean financial institution decided to call off its proposed Samurai deal after already mandating the banks, as investors sought a higher premium for the transaction. It was just a month after the death of North Korean leader Kim Jong-il and investors were worried about geopolitical risks in the Korean peninsula.
A faint-hearted, inexperienced borrower could have given in to investors. After all, it was the banks first deal in the offshore market for 2012 and postponing it might have jinxed its borrowing plans for the rest of the year. But Hana did not blink. Instead it looked at its options and shifted to Thailand, where it got a more favourable response.
The bank raised Bt10bn ($317m) from Thailand in February, marking its return to the baht market after making its debut there last September.
"Because we are already familiar with the Thai market and investors already know us, it was easier to shift from Japan to Thailand," says Jae-Uk Jeong, the banks senior manager for international banking.
Hana revisited the Japanese market in late July, when conditions had calmed down. It was rewarded with a 90bp saving for its patience. When rival Kookmin Bank issued two year Samurai bonds in February, it paid 163bp over swaps and raised a much smaller amount of ¥7.6bn ($97m). Hana sold ¥30bn of two year Samurai bonds and paid 92bp over swaps.
"It helped that we delayed the transaction," says Jeong. "At Hana, pricing and timing are our foremost considerations when we decide to tap the market."
But overcoming tough markets and looking for the right moment to strike are just a few of the challenges that have shaped Hanas funding efforts through the year. Its success in becoming the first Korean commercial bank to tap the baht market last September has inspired Hana to become the first among its rivals to issue Kangaroo and dim sum bonds.
Burden of discovery
At the start of the year, the bank aimed to raise about $2bn from offshore creditors. After issuing dollar, Samurai and baht bonds, Hana is almost fully funded for the whole year, says Jeong.
But if an opportunity arises, or if it sees a rise in loan demand from clients for foreign currency funds, then it might reconsider doing another bond offering, he says.
"We have enough liquidity at the moment," says Jeong. "We dont need to raise more foreign currency funds. If we have demand from our clients, and the timing is favourable to us, then we will."
Next year, Hana has smaller funding requirements. While the lender has not yet firmed up its plans for 2013, it has only about $1bn of foreign debt that will mature next year, says Jeong. That means it may have to raise less than what it has done this year, he adds.
While Hana has what it takes to lead its peers into the Dim Sum and Kangaroo markets, this distinction does not come cheaply, says Alan Choi, head of Korea DCM at Barclays, one of the bookrunners for the borrowers $500m global bond deal last December.
"The first issuer carries the burden of price discovery of a new market which often requires a premium," says Choi. "But on the flip side, you also enjoy the benefit as an early mover. It becomes easier to tap the market for the second time because investors already know you."
But Hana is undaunted. It attempted to tap the Kangaroo market in 2010 after it held a roadshow. However, the market backdrop was tough at that time, so the lender decided to hold off. It is considering issuing in the Kangaroo bond market next year.
"Its our desire to become the first issuer in Kangaroo and Dim Sum," says Jeong. "Among the Korean commercial banks, we have fierce competition in every field. Our bank wants that record of being the first issuer in any bond market."
The rising prominence of the Dim Sum market has also not escaped Hanas attention.
While rival Shinhan Bank became the first Korean commercial lender to issue Dim Sum bonds this year, its transaction was a private placement.Hana is hoping that it can issue a public bond in the offshore bond market by the end of this year or next. If it succeeds, it will have achieved its aim of becoming the first Korean commercial lender to issue Dim Sum bonds through a public offering.