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KoFC nabs $750m on bond return but black clouds are overhead

November 14, 2011 You can access the full text of this article on Euroweek website
Korea Finance Corp (KoFC) returned to the international bond market for only its second ever deal this week, raising $750m from an issue that drew plenty of demand from US accounts. But bankers said dark clouds are hovering over the market — and they worry that not enough borrowers realise it.

KoFC continued a slew of deals from state-owned Korean borrowers over the last few months, and showed bankers and issuers alike that the market remains open for good credits.

The policy bank priced its November 2021 bond at 265bp over 10 year Treasuries, the tight end of 265bp-275bp guidance. That offered investors a new issue premium of 10bp-20bp, according to analysts. But funding officials at KoFC were happy to pay up, given the shaky market backdrop.

"Investor sentiment was boosted by the resignation of Berlusconi, but there was still a lot of uncertainty in the market [this week]," Bong Sik Choi, senior executive director at KoFC, told EuroWeekAsia. "We did not care too much about pricing. We listened to our lead managers and took their advice."

That attitude is a rarity in any credit market but debt bankers said it is needed now more than ever. Some funding officials are still pushing aggressively to hit their price targets, talking to investors just enough to convince them there is more supply coming — but not enough to launch a deal.

"Borrowers don’t necessarily understand just how dark a cloud there is over the market," said a debt banker. "In 2007 the market shut down for five or six months and it was very difficult to raise money. We’re in much better conditions now but even so, I don’t think I would want to be a CFO who turned down $1bn of funding over 5bp."
  • Status
    outstanding
  • Country of risk
    Republic of Korea
  • Redemption (put/call option)
    *** (***)
  • Amount
    750,000,000 USD
  • М/S&P/F
    — / — / —
  • Full name
    Korea Finance Corporation
  • Registration country
    Republic of Korea
  • Industry
    Financial institutions