Korean Air Lines-guaranteed bonds secure lowest coupon
KAL issues US$300 million bond offering with a yield of 2.124%, generates orders exceeding US$1.1 billion from over 70 accounts
29 Aug 2019 | Chito Santiago

Korean Air Lines (KAL) on August 28 priced a US$300 million bond offering with a coupon described as the lowest for a non-Japan Asia US dollar bond issuance since 2017.

The Reg S three-year deal was priced at 99.641% with a coupon of 2% to offer a yield of 2.124%. This is equivalent to a spread of 70bp over US treasuries, or at the tight end of the final price guidance of between 70bp and 75bp. This also represented a price compression of 25bp from the initial guidance of 95bp area.

The low coupon came on the back of the irrevocable guarantee extended to KAL by South Korean policy bank Korea Development Bank (KDB), which is rated Aa2/AA/AA-. In executing the transaction, KAL held a series of fixed income investor meetings in Asia and Europe that began on August 19.

The deal generated a robust order book at the final price guidance level, exceeding US$1.1 billion from over 70 accounts, despite the volatile market backdrop due to the ongoing US-China trade dispute.

In terms of geographic distribution, 74% of the bonds were allocated in Asia and 26% in Europe. By type of investors, fund managers accounted for 51%, insurance companies and corporates 26%, banks 19%, and private banks 4%.

Proceeds from the transaction will be used for general corporate purposes, including repayment of existing debt. Credit Suisse, KDB and UBS acted as the joint bookrunners for the transaction.

KAL previously tapped the US dollar bond market in early March 2018 on a standalone basis – marking its debut offshore bond offering. The company paid a coupon of 5.875% for the three-year deal, offering a yield of 6%.