By Jihye Hwang
HONG KONG, April 24 (IFR) - South Korea's Kookmin Bank has raised US$500m from a Covid-19 response sustainability bond, joining government efforts to shore up the ailing economy with the country's first public bond offering designed to mitigate the fallout from the pandemic.
The 1.75% five-year senior unsecured notes priced at 99.420 to yield 1.872%, or Treasuries plus 150bp, well inside initial guidance of 195bp area.
The 144A/Reg S offering makes the Korean institution the first non-sovereign Asian issuer to raise funds in the public international market to fight the pandemic. Previously, Indonesia said it would use part of the proceeds of a recent US$4.3bn bond offering to fund its virus response and fellow Korean lender Shinhan Bank raised US$50m from a private placement to offer support to virus-hit small shops.
"This is our fourth ESG international bond issue and comes in line with our ongoing efforts to tackle the impact of the virus on self-employed and smaller businesses," said a Kookmin Bank official.
The bank intends to use around 90% of the proceeds to extend loans to virus-hit SMEs, small offices and home businesses. The rest will be used for ESG-related projects.
Sean McNelis, global co-head of debt capital markets at joint bookrunner HSBC said the transaction shows strong investor interest in the Covid-19 alleviation format, particularly where it satisfies social bond eligibility criteria.
"We expect other issuers to follow a similar issuance format in the coming months," he said.
The offering was covered almost eight times, with final orders of over US$3.9bn from 181 accounts.
"The deal priced 5bp inside of where we saw fair value after receiving strong orders from Asia that were enough to support the whole transaction and came in at US$3.5bn before Europe and US books opened," said a banker on the deal.
The Korean bank's 2023s and the 2025s of like-rated quasi-sovereign agency Export-Import Bank of Korea provided pricing references and were trading around Treasuries plus 137bp and plus 90bp.
There were no new issue concession and the bonds traded around 3bp–5bp tighter in the secondary market, according to the banker.
The Korean government has urged commercial banks to provide active support for faltering companies hit by the pandemic.
"It is encouraging to see capital markets playing a key role in the delivery of economic support to people, businesses and societies affected by this crisis," said HSBC's McNelis.
Asia took 70% of the new bonds, the US 19% and Europe 11%. Fund managers bought 64%, banks and financial institutions 23%, insurers and pension funds 11% and private banks 2%.
The new bonds have expected ratings of Aa3/A+ (Moody’s/S&P), in line with the issuer.
Bank of America, Citigroup, Commerzbank, HSBC (B&D), Societe Generale and Standard Chartered Bank are joint bookrunners. KB Securities is co-manager.
(Reporting by Jihye Hwang)
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