KDB bond offering secures tightest spread
Triple-tranche deal, including a green bond, well oversubscribed
12 Jan 2021 | Chito Santiago

One of South Korea’s policy banks, Korea Development Bank (KDB), returned to the US dollar bond market as it priced on January 11 a triple-tranche bond offering totalling US$1.5 billion, including the issuance of a green bond.

In doing so, the bank achieved for all three tranches the tightest spread among the Korean issuers, with the exception of the sovereign.

The offering marks the first US dollar public bond transaction out of Korea in 2021. The SEC-registered deal comprised of a green bond amounting to US$700 million for 3.5 years, which was priced at 99.756% with a coupon of 0.40% to offer a yield of 0.472%. This was equivalent to a spread of 25bp over the US treasuries.

The net proceeds will be allocated to finance projects from the eligible green categories as set forth in the KDB sustainable bond framework. In particular, the bank intends to focus on projects related to the manufacture of rechargeable batteries for electric vehicles and/or the construction or expansion of renewable energy production facilities.

The second tranche was for US$500 million for 5.5 years, which was priced at 99.759% with a coupon of 0.80% and a re-offer yield of 0.845%. This represented a spread of 35bp over the US treasuries.

The final tranche was for US$300 million for 10 years, which was priced at 99.715% with a coupon of 1.625% to offer a yield of 1.656%. This was equivalent to a spread of 52.5bp over the US treasuries.

The transaction was well oversubscribed by global fixed-income investors and attracted a total order book of US$4.6 billion from over 139 accounts. BNP Paribas, BofA Securities, J.P. Morgan, KDB Asia, Societe Generale, Standard Chartered and UBS were the joint bookrunners and joint lead managers for the transaction, and while Kexim Asia acted as a co-manager.

KDB priced its inaugural US dollar green bond in June 2017 amounting to US$300 million for five years. It then tapped the euro bond market for its second green bond offering in July 2019 amounting to 500 million euros (US$609.75 million), also for five years, the proceeds of which were used for projects relating to environmental protection and renewable energy such as solar and wind power, and sewage treatment facility.