Monday, 12 January 2009

Korea's Kexim Raises $2 Billion With Bond Sale. Yields Surge!

South Korea's Export Import Bank of Korea (KEXIM), check this out guys, an Aa3 rated issuer by Moody's, sold $2 billion of senior fixed rate notes to international investors at a yield of 6.25 percentage points spread over the mid-swaps rate. Investors who participated in the transaction told us that before books were closed, the most likely scenario for the sale was a spread close to 7 points over the M/S rate (as the mid-swap rate is known by jargon.)

Minutes before getting the results, we received conflicting pricing talk. The five-year debt was seen selling at around ''668 to 670´´ points, and was to be priced at a spread of 6.8 points compared to the equivalent five-year Treasury yields. The yield for the five-year Treasury was 1.44 percent today. Conditions in the marketplace, thus, still remain challenging. See how many banks were handling this sale (they probably agreed to trim fees to win this allocation): Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc. (I was told it's the lead manager,) Merrill Lynch & Co., Royal Bank of Scotalnd Plc.

You, dear reader, may wonder why I am writing about Korea, when this blog refers to Latin America (specifically.) The Kexim bond probably will provide a benchmark for corporate bond sales in Asia, and therefore, may give us a hint whether corporate borrowers in other emerging markets (e.g. Latin America) are ready to jump off and tap the markets. This sale will indeed proof whether other South Korean companies (especially banks) can access to funds -- giving us some indication about the situation in credit markets. South Korea, as some of you may know, has been badly hammered by the credit meltdown and the global recession -- the won plunged against most currencies and the nation's companies have been shuttered off wholesale funding.

If I were Petrobras (a BBB+ rating at Standard and Poor's -- two levels above the sovereign,) I would think it twice before going to the debt capital markets -- even as the window of opportunity was open with last week's sovereign bond sales.

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