South Korea’s only fully integrated natural gas company Korea Gas Corporation (Kogas) broke the lull in G3 bond issuance out of Asia when it priced on July 14 a US$500 million offering, taking advantage of the optimism about the resolution on the Greek crisis.

The Reg S/144A deal was priced at 99.824% with a coupon of 3.50% to offer a yield of 3.521%. This was equivalent to a spread of 110bp over the US treasuries, or at the tight end of the final price guidance of between 110bp and 115bp, and 15bp inside the initial guidance of 125bp area. The bonds performed in the secondary market and were trading up in the morning of July 15.

The transaction was the first to come out of the market since China Overseas Land and Investment Limited (COLI) took advantage of a window of opportunity and priced on July 7 a 600 million euro deal – the first euro-denominated bond issue by a Chinese property company.

“When it was felt over the weekend that the Greek resolution could be sorted out by Wednesday (July 15), the market rallied and it was a good opportunity to announce the Kogas trade and, in fact, a series of trades during the past two days,” says a banker familiar with the deal.

The book building went pretty smoothly and immediately garnered demand of US$1 billion. Orders continued to come in later in the day and saw the participation of European and US investors, with the arrangers announcing a final price guidance of between 110bp nd 115bp – capping the deal size at US$500 million.

The offering was finally printed at the tight end at 110bp over the US treasuries, paying a new issue concession of just 5bp as fair value was estimated at 105bp, the banker adds.

The final demand amounted to US$2.15 billion from 156 accounts, with 55% of the bonds sold in Asia, 24% Europe and 21% US. By type of investors, pension funds accounted for 29%, banks 25%, fund managers 22%, hedge funds and private banks 15% and other investors 9%.

Proceeds from the Kogas bonds, which are issued under the company’s existing US$8 billion global medium-term note programme, will be used for general corporate purposes, including capital expenditures, refinancing and working capital.

Bank of America Merrill Lynch, Barclays, Deutsche Bank, HSBC, Mizuho Securities and UBS acted as the joint bookrunners for the transaction.