KOOKMIN Bank successfully priced its inaugural 5-year 500 million-euro (US$563.6 million) Reg S sustainability covered bond offering on July 8.
The offering marks the first EUR-denominated covered bond issued by a Korean bank as well as the first sustainability covered bond issued by a non-European issuer. The 5-year fixed rate bond was priced at 40bp over the 5-year euro mid-swap rate with a re-offer yield of 0.052%, and it is expected to be listed on the Singapore Exchange.
The bank announced the deal with an initial price guidance of euro mid-swap rate plus high 40bp just after the European markets opened. Rated AAA by both S&P and Fitch, the offering drew strong demand from high quality investors globally, particularly from Europe.
The transaction quickly gained a strong momentum as it garnered sizeable orders from global asset managers and high-quality central bank and SSA names, achieving a solid orderbook of over 2 billion euros with participation from over 80 accounts.
The strong demand enabled the bank to revise the price guidance to 45bp area over euro mid-swap rate and ultimately price the transaction successfully at 40bp. The coupon rate was 0.052% offering a near-zero yield. The transaction achieved the lowest coupon rate ever for a benchmark covered bond issued by an Asian commercial bank.
The offering is the first euro-denominated covered bond being issued under the Korean Covered Bond Act (the Act). Since the legislation of the Act in 2014, Kookmin Bank has been a pioneer of statutory covered bond issuances, holding the title as the first commercial bank in Korea to issue statutory covered bonds in multiple currencies including USD and KRW.
The bank has issued 4 foreign currency denominated covered bonds (total amount of US$1.1 billion and 500 million euros) so far including the latest offering, and 7 KRW-denominated (total amount of 2.12 billion Korean won/US$1.76 million) covered bonds under the Act.
The net proceeds from its latest issuance will be allocated to support environmentally-friendly and prosocial projects in accordance with Kookmin Bank’s sustainable financing framework. Specifically, part of the proceeds may be used to provide financial aid to those affected by Covid-19.
BNP Paribas, Citigroup, Crédit Agricole CIB, HSBC, J.P. Morgan and Société Générale acted as joint bookrunners and joint lead managers for the offering, and KB Securities acted as co-manager.
Geographically, the allocations were split 87% to Europe, 11% to Central and Eastern Europe, and 2% to Asia-Pacific. By investor type, 55% were allocated to asset managers and fund managers, 19% to banks, 14% to official institutions and central banks, 10% to insurance and pension funds, and 2% to private banks, hedge funds and others.