Better Reputation
The Korean National Oil Corporation (KNOC) issued 10-year global bonds worth US$600 million on Sept. 23 at a coupon rate of 3.25 percent.
The bond issue constitutes the first global bond issue by Korea after S&P’s credit rating adjustment last week, which has led to a reduction in its spread. Korea’s CDS premium has declined by 1 bp since the adjustment, while the Asia iTraxx IG index has risen by 10 bps or so.
Under the circumstances, the KNOC increased the bond issue amount from US$500 million to US$600 million. In addition, it issued the bonds at a distribution rate of 115 bps, while the rate of its already-issued bonds is 120 bps higher than that of the 10-year U.S. treasury bond, and American bonds pay a new insurance premium of at least 10 bps these days.
The KNOC is expecting the advance long-term bond issue to be prepared for a global interest rate hike that will help reduce its interest cost. At the same time, the successful bond issue is predicted to lead to an increasing number of Korean public and private enterprises issuing long-term global bonds at lower rates, so that their financing costs can be reduced across the board.
Approximately 110 institutional investors across the world placed orders worth US$1.7 billion for the bonds. A full 56 percent of the bonds are slated to go to insurers and pension funds, and 25 percent will go to fund and asset management firms. The rest goes to banks and the like.