Hyundai Capital sells $2.5 bn dollar bond; Tongyang Life issues $300 mn perpetual bond

Hyundai Capital America, the US capital arm of Hyundai Motor Group, has issued $2.5 billion worth of global bonds, the largest amount for a local company to issue abroad so far this year, according to the investment banking industry on Sept. 16.

In the bookbuilding on Sept. 15, the dollar bonds received orders worth about $10 billion. The overwhelming demand will allow Hyundai Capital to issue bonds at a lower-than-expected yield.

Three-year bonds worth $1.1 billion will be issued with a 1.28% annual yield, five-year bonds with an annual 1.84% yield, and seven-year bonds with an annual 2.37% yield. The global credit rating for the bond stands at BBB+.

Hyundai Capital America plans to use the proceeds for its US-based operations. The company offers financial services such as leases and payment plans to customers who purchase Hyundai and Kia automobiles in North America.

Korean companies are treading lightly back into the global bond market as it stabilizes, recovering from the impact of the coronavirus. Alongside Hyundai Capital America, South Korea's Tongyang Life Insurance Co. also issued $300 million worth of 30-year foreign currency-denominated perpetual bonds.

The Korean insurer's bookbuilding on Sept. 15 raised around $900 million from 70 foreign institutional investors. Asian institutional investors accounted for 79% of the total orders, with the remaining from Europe, the Middle East and Africa.

The high demand will allow Tongyang Life to raise capital at a lower cost. The yield has been set at 5.250% annually, 0.125 percentage points lower than the expected 5.375%. The global credit rating for the bond stands at BBB-.

Tongyang Life is the first local insurer to issue bonds abroad since May 2018. Nomura Securities, JP Morgan, and UBS were joint bookrunners.

The bond issuing will boost the insurer's risk-based capital ratio to 240% from 217.3% late June. It may also encourage other domestic insurers to revisit the overseas bond market.

In the past four months, three local insurers -- Lotte Non-Life Insurance Co., Heungkuk Fire & Marine Insurance Co., and Fubon Hyundai Life Insurance Co. -- failed to raise enough demand for their subordinated bond issues.

Write to Jin-sung Kim at jskim1028@hankyung.com