Korean Companies Facing Debt Wall Turn to Dollar Bond Market

Bond investors are readying for a slew of South Korean deals as companies from Asia’s fourth-biggest economy face the most maturing dollar notes since 1999.

Korea Land & Housing Corp. and Woori Bank Co., a unit of the country’s biggest financial group by assets, are finishing investor-update meetings today ahead of possible U.S. currency note sales next week, people familiar with the matters said. Korea Resources Corp., a state-run minerals explorer, began meeting fund managers in Asia and Europe yesterday.

Korean issuers sold $8.9 billion of dollar bonds last quarter, the most since the second quarter of 2009, according to data compiled by Bloomberg. Won-denominated corporate note sales jumped 39 percent to 8.5 trillion won ($8.2 billion) from the three months ended Dec. 31. Companies in Korea face some $27 billion of dollar bonds maturing this year and a further about $21 billion in 2015, the data show.

“South Korean companies have significant refinancing requirements this year,” said Mark Reade, a Hong Kong-based desk analyst at Mizuho Securities Asia Ltd. “And with low Treasury yields driving inflows into U.S. investment-grade funds, there’s plenty of appetite for high-quality names from Asia.”

Yields on Korean dollar debt averaged 2.74 percent on April 14, the least since May, JPMorgan Chase & Co. indexes show. The debentures have returned 2.42 percent this year, compared with a gain of 3.68 percent for dollar notes in the region as a whole, according to HSBC Holdings Plc.

Banglalink Offering

Mobile telecommunications company Banglalink Digital Communications Ltd. is also considering dollar notes, marketing five-year securities at a yield of about 9 percent.

A sale would be the first dollar issue for a Bangladeshi company, Bloomberg-compiled data show. Dhaka-based Banglalink Digital had some 27 million subscribers as of June, according to its website. Investors should demand a yield of about 9.1 percent to 9.6 percent for the notes, according to Nomura Holdings Inc.

The cost of insuring Asia-Pacific corporate and sovereign bonds declined today. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 120 basis points as of 8:05 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The gauge is poised to drop for a third straight day to match its lowest level since April 10, according to data provider CMA.

Australia Risk

The Markit iTraxx Australia index decreased 1 basis point to 98.5 as of 9:25 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark is on track to decline for a second straight day, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index retreated 1.25 basis points to 84.5 basis points as of 8:57 a.m. in Tokyo, Citigroup Inc. prices show. The measure is poised to fall to its lowest level since April 4 after recording its biggest one-day decline since March 4 yesterday, according to CMA.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Andrew Monahan

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.