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dollar bond

KT issues $400 mn dollar-denominated bond with record-low 1% interest rate

Tae-ho Lee Aug 25, 2020 (Gmt+09:00)

South Korea’s telecom giant KT Corp. has set a record-low interest rate among privately-held Korean companies with the issue of a dollar-denominated bond worth $400 million, according to the investment banking industry on August 24.

The company has fixed an annual interest rate of 1.072% for a five-year dollar-denominated bond alongside a minimum spread.

KT’s bookbuilding process followed a Regulation S approach, inviting non-US institutional investors. In total, 102 institutions participated and raised over $2 billion. Asia-based investors accounted for 75%, with the remaining investors from Europe. This is the first time in three years for the company to issue a dollar-denominated bond.

The issued bonds will be listed on Singapore Exchange (SGX), and the proceeds will be used to repay borrowings.

“Investors have taken great interest in the telecommunication sector since the spread of the global coronavirus. KT’s solid performance as a leading telco in Korea and the growth potential of its 5G business scored a significant success,” said an investment banking source.

Initially, the offering guideline for KT’s interest rate was 1.25% points higher than the 0.272% interest rate of the US five-year treasury bond, but was revised to 0.80% points following overwhelming investor demand during the bookbuilding process. The newly fixed interest rate is about 0.10% points lower than the Fair Value, which takes into account the company's A- credit rating.

KT was also attractive to investors as the only privately-held Korean company with a global A-level investment grade to issue bonds so far this year.

BNP Paribas, HSBC, Citigroup Global Market Securities, Credit Agricole Corporate and Investment Bank, and Standard Chartered Securities were joint bookrunners.

KT posted 724.9 billion won ($611 million) in operating profit during the first half of this year, marking a 5.0% year-on-year increase. The quarterly results are in contrast to many companies that suffered poor earnings due to the coronavirus impact.

At home, the telecom giant’s stable earnings drew huge demand for its new debt during the June bookbuilding. At the time, KT received subscription demands worth 1.45 trillion won, seven times higher than the offering amount of 200 billion won. KT then increased the offering to 300 billion won in response to overheated subscription demand.

Write to Tae-ho Lee at thlee@hankyung.com

Danbee Lee edited this article

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