The Korea Development Bank (KDB) has joined the bandwagon among financial institutions that are tapping the bond market with both fixed and floating rate note (FRN) tranches in their fund raising. In doing so, it achieved a tighter pricing than another Korean policy bank, the Export-Import Bank of Korea (Kexim).

KDB on February 21 priced an SEC-registered three-tranche offering totaling US$1.5 billion, equally split at US$500 million each. The first tranche is a three-year FRN, which was priced at par and at a spread of 45bp over three-month Libor. This was at the tight end of the final price guidance of between 45bp and 50bp, and 15bp inside of the initial guidance of 60bp area.

The second tranche was a five-year fixed rate note, which was priced at 99.489% with a coupon of 2.625% to offer a yield of 2.735%. This was equivalent to a spread of 82.5%bp over the US treasuries – also at the low end of the final guidance of 85bp area (+/- 2.5bp) and 22.5bp back of the initial guidance of 105bp area.

This was the most tightening out for a Korean bond transaction in the five-year space since Kia Motors Corporation priced in April 2016 its own five-year US$400 million tranche at a spread of 145bp over the treasuries, which was tighter by 25bp from the initial guidance of 170bp area.

The final tranche was a five-year FRN, which was priced at par and at a spread of 70.5bp over three-month Libor.

The KDB pricing on both the five-year fixed and five-year FRN were also tighter when compared with what Kexim has achieved when it made its first foray in the US dollar bond market this year in January.

Kexim’s fixed rate bond had a coupon of 2.750% to offer a yield of 2.807%, representing a spread of 92.5bp over the treasuries, while the FRN was priced at a spread of 87.5bp over the three-month Libor. Both KDB and Kexim are similarly rated at Aa2/AA/AA- by all three rating agencies.

The KDB transaction garnered the largest total order book for a Korean deal so far this year at US$4.1 billion from about 200 accounts on the back of strong momentum built over the global sessions that enabled KDB to tighten the price guidance.

The three-year FRN attracted a total demand of about US$1.1 billion, with 44% of the paper distributed in EMEA, 31% in the US and 25% in Asia. By type of investors, central banks, sovereigns and supranationals accounted for 74%, fund and asset managers 17%, banks, private banks and other investors 6%, and insurance companies and corporates 3%.

The five-year fixed rate note generated an order book of US$1.4 billion with 58% sold in Asia, 32% in the US and 10% in EMEA. Fund and asset managers were the biggest buyers with 44%, followed by central banks, sovereigns and supranationals with 32%, banks, private banks and other investors 16%, and insurance and corporates 8%.

The five-year FRN garnered a total demand of US$1.6 billion with Asia accounting for the bulk of the paper with 77%, while 20% was allocated in EMEA and 3% in the US. Banks, private banks and other investors bought 38%, fund and asset managers 32%, central banks, sovereigns and supranationals 29% and insurance companies and corporates 1%.