KEB Pays Lowest Yield Premium of Korean Banks This Year

Korea Exchange Bank (004940) paid the lowest premium by a South Korean bank this year for its record $700 million bond sale as borrowing costs fell after Greece’s election eased global financial turmoil.

The country’s fifth-largest commercial lender by assets sold 3.125 percent, five-year notes at a yield of 255 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. KEB paid 10 basis points less than higher-rated Hana Bank, which issued $500 million of 2017 securities in April, data compiled by Bloomberg show.

Average spreads on Korean dollar debt fell to a 2 1/2-month low yesterday, according to JPMorgan Chase & Co. indexes, after gains by pro-bailout parties in Greece reduced concern the country will exit the euro. KEB said it took advantage of optimism in the markets after the election.

“Investors need to put money to work as we’ve only seen a few windows for new issuance over the past couple of months,” William Mak, a credit analyst at Nomura Holdings Inc., said by phone today from Hong Kong. “It will depend on individual companies’ funding needs, but we may see more issues as a result.”

Asian issuers outside Japan sold $3.8 billion of dollar bonds in June, the least since December, according to data compiled by Bloomberg. That compares to $15.5 billion in April, the busiest month on record, the data show. The region’s companies and sovereigns have sold $63.8 billion of U.S. currency debt this year, more than volumes for all of 2011.

Hana Bonds

“Korea Exchange Bank’s pricing is reasonably decent as it gives some pick-up on where Hana Bank’s existing bonds are trading,” Mak said.

Hana’s notes due in October 2017 yielded 232.6 basis points more than similar-maturity Treasuries as of 10:59 a.m. Seoul time, ING Groep NV prices show. The borrower is rated A1 by Moody’s Investors Service and A by Standard & Poor’s, one level above KEB, which was acquired by Hana Financial Group Inc. (086790), Hana Bank’s parent, in February.

KEB’s new notes were trading at about 246.7 basis points more than benchmark Treasuries as of 12:49 p.m. in Seoul, according to prices from Credit Agricole SA. Investors sought an average yield premium for South Korean borrowers of 253 basis points yesterday, the lowest since April 3, JPMorgan indexes show.

KEB got orders for $5.5 billion of debt, about 7.8 times the amount offered, the Seoul-based bank said in an e-mailed statement today. Investors in Asia made up 55 percent, while U.S. and European buyers comprised 28 percent and 17 percent, respectively.

It last issued a benchmark dollar note in July 2010, selling $500 million of 4.875 percent January 2016 securities, according to data compiled by Bloomberg. Benchmark typically means a sale of at least $500 million. KEB has the equivalent of $4.64 billion of bonds maturing by 2017, the data show.

Bank of America Corp., Citigroup Inc., HSBC Holdings Plc, ING Groep NV, KEB Asia Finance and Morgan Stanley managed the sale, data compiled by Bloomberg show.

To contact the reporters on this story: Taejin Park in Seoul at tpark31@bloomberg.net; Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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