Hyundai Capital Services became the first triple-B rated credit from Korea to sell dollar-denominated global bonds this year after launching a tightly priced $500m deal late on Thursday.
The Baa2/BBB rated consumer lender priced the 5.5 year benchmark late on Thursday morning US time at 99.543 with a 6% coupon, equal to a spread of 369.4bp over US Treasuries or 320bp over mid-swaps.
That was inside guidance, set at 325bp-350bp over mid-swaps on Wednesday by bookrunners Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and Royal Bank of Scotland. That would have equated to a spread of 375bp-400bp over US Treasuries for the Reg S/144A deal.
The tighter pricing came after risk appetite picked up sharply during New York market hours on Thursday, driving strong US demand for the rare name, said bankers on the deal. This was triggered by news that the US grew by 3.5% year-on-year for the third quarter — above the consensus 3.3% forecast by economists.
The deal follows an extensive roadshow this week by South Korea’s largest consumer finance company in Singapore, Hong Kong, Boston, London and New York on Wednesday. The issuer was last in the market in January 2007, launching a $400m five-year Reg S bond at mid-swaps plus 58bp. That 2012 bond was trading at between 290bp-295bp over swaps on Wednesday morning and had widened to 300bp-325bp at the time of pricing.
However, bankers say bid/offer spreads vary from trader to trader due to the illiquidity in Asian triple-B cash bonds. As a result, "investor feedback from the regular real money guys" during the roadshow generated the pricing guidance, said a banker on the deal.
The issue demonstrates the investor appetite for investment grade private sector issues in non-Japan Asia after a flood of sovereign backed issuance in Korea in recent months. "This could serve as a liquid benchmark for the region’s private issuers," said one lead. The tight pricing and high demand contrasts with the sell-off in Asian credit spreads and scrapped deals from regional peers this week.
Hyundai is also be the first triple-B credit from Korea to sell bonds in the dollar market since SK Energy sold $450m of five year bonds in June 2008, and the deal illustrates the strength of investors’ appetite for private sector Korean risk after a spate of new issues from the country’s public sector. Hyundai Capital Services is a Korean auto lender part owned by General Electric.