Hyundai Motor will set out on a bond roadshow next week, while its affiliate Hyundai Card is in talks with investors. Commercial lenders Shinhan Bank and Woori Bank are also having meetings, while state-owned Export-Import Bank of Korea is said to have hired arrangers. Korea Development Bank has come back to talk to investors and Korea Finance Corp — set up by the government to take over the policy functions of the soon-to-be-privatised KDB — is expected to come to the market later this year..
Korean issuers dominated the dollar bond market in Asia throughout much of last year, but they have not greeted the start of 2010 with such an appetite to issue. Now that a spate of Korean borrowers have moved closer to selling dollar bonds, all that looks set to change.
KDB and Industrial Bank of Korea, two of the nation’s three policy banks, have been the only two Korean issuers to sell debt in the international bond market this year, raising a combined $1.1bn and making up only a small percentage of the $10.6bn raised by Asian issuers so far this year.
Bankers attribute the lack of deals to a reluctance on the part of government officials to allow local borrowers to fund overseas, for fear that the repatriation of proceeds will put pressure on the Korean won. Companies do not officially need government approval to sell dollar debt, but few are prepared to go against the wishes of policymakers.
The long list of issuers considering dollar debt sales, however, suggests a shift in attitudes that could unleash a wave of new issues from the country.
Korean queue builds
Shinhan Bank and Woori Bank have already picked lead managers for their own deal, a Hong Kong fund manager said on Thursday. Credit Suisse and UBS are set to manage the Woori issue, while Deutsche Bank is part of a consortium running Shinhan’s deal, he said.
Kexim could beat all of these issuers to the market, having the ability to rapidly launch and close a deal thanks to a long history of international issues. Several bankers said it has already mandated banks for a deal, but investors said they had not yet been approached with early price indications.
Hyundai Motor appears the closest to issuing a deal, having picked Barclays Capital, Citi, Goldman Sachs, Merrill Lynch and Nomura to take on a roadshow next week. But the company is not in a position to issue immediately and needs time to update its documentation, said a banker close to the deal.
The leads are travelling in two teams alongside funding officials and investor relations managers at Hyundai Motor. Jae-Min Song, head of investor relations at the company, Hyun-Sang Choi, deputy general manager in the IR team, and Joo-Hyung Han, manager in the international finance team, will meet investors in Singapore, Hong Kong and London, alongside debt bankers. Meanwhile, Soo-Young Lee, head of international finance, and Dong-Hyun Kim, an associate in the investor relations team, will head to New York, Boston and Los Angeles.
Hyundai Card has mandated lead managers for its own deal. Barclays Capital, ING, Merrill Lynch and Standard Chartered will manage the offer — which could potentially come before Hyundai Motor’s offer as the credit card arm has already been on a roadshow. It met investors in Asia, the US and the UK in January, travelling with all the leads except Merrill Lynch.
Bankers for Hyundai Motor were already making indications to investors of around 225bp over mid-swaps for a five year deal, while the leads on Hyundai Card were sounding out a three year deal at the mid-300s over mid-swaps, said a fund manager in Hong Kong.
KDB on the road again
Korea Development Bank raised $750m from a 5.5 year deal at the start of February — but it has already returned to Hong Kong and Singapore to meet investors. The meetings are unlikely to be a precursor to a deal, but show the close attention that KDB pays to the dollar investor base.
Korea Finance Corp (KoFC) is getting closer to issuing its own international bond. The issuer was created by the Korean government to take over the public policy functions of KDB, which the government hopes to privatise and turn into a competitive global investment bank. It now hopes to become a frequent issuer in Korea.
But Jae Han Ryu, chief executive of KoFC, told EuroWeek in December that KoFC would be unlikely to sell a deal in the first-half of the year, arguing the arduous documentation process made that a difficult proposition.
While Korean borrowers may not match the $20bn of bonds they sold last year, it is clear they are now planning on returning to the market en masse. The country has a wealth of quasi-sovereign issuers, all of whom could find good demand if they returned to the market in 2010.
Korea Hydro and Nuclear Power is one of those issuers, and it could soon follow up the $1bn deal it sold last year. The borrower sent out a request for proposals to debt bankers last month. n
Matthew Thomas