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Corporate bonds

KOGAS, Hyundai Motor Turkish unit issue foreign currency bonds at narrower spreads

KOGAS and Hyundai Motor’s Turkish unit sold foreign currency corporate bonds at narrower spreads than their initial targets on strong demand

By Jul 07, 2021 (Gmt+09:00)

(Source: Getty Images Bank)
(Source: Getty Images Bank)

Korea Gas Corp. (KOGAS) and Hyundai Motor Co.’s Turkish unit sold foreign currency corporate bonds at narrower spreads than their initial targets on strong demand, according to the investment banking industry on July 7.

KOGAS issued $800 million worth of fixed-rate, non-guaranteed senior corporate bonds -- $450 million in five-year bonds and $350 million in 10-year bonds -- in its first foreign currency-denominated bond sale since 2019.

The five-year bond was issued at 0.375 percentage points above the five-year US Treasury yield, while the 10-year one was sold at 0.65 percentage points higher than the 10-year US Treasury yield. Both are 0.3 percentage point lower than KOGAS’ initial expectations, as the state-run company received $1.45 billion worth of orders in the bookbuilding of the foreign currency bonds. The US five-year Treasury yield as of July 7 was at 0.8% and the 10-year yield was at 1.35%.

KOGAS was expected to use the proceeds to refinance $500 million worth of corporate bonds, which mature this month, and reduce interest payment costs. Five years ago, it had issued five-year bonds at an annual interest rate of 1.9%.

The sales attracted various institutional investors including commercial banks and fund managers. For the latest five-year bond sale, 75% of the investors were Asian institutions, while 23% collectively were from Europe, the Middle East and Africa. US investors made up 2%. For the 10-year bonds, 64% of buyers were Asians and 30% were US institutions.

Moody’s Investors Service and Standard & Poor's (S&P) rated the KOGAS bonds at Aa2 and AA, respectively, the same ratings they gave South Korea overall. KOGAS’ credit rating is baa3, far lower than the bonds' rating because of the risk of worsening profitability due to the government regulations on gas charges. But its corporate bonds were rated higher, reflecting the government's ownership of a 26.2% stake in the company.

BNP Paribas, Citigroup Global Markets, Credit Agricole, JPMorgan, UBS, KB Securities Co., KDB Bank and Mirae Asset Securities Co. underwrote the bond issues.


Hyundai Assan Otomotiv, Hyundai Motor’s Turkish unit, sold $300 million worth of five-year senior Reg S, a bond issued in the Eurobond market for international investors, according to the IB industry. The corporate bond is guaranteed by its parent Hyundai Motor Co.

Thanks to orders worth $1.15 billion from 64 institutional investors, the straight bond was sold at 0.85 percentage points higher than the five-year US Treasury yield, lower than the initially offered spread of 1.15 percentage points.

Among investors of the bond, 95% were Asian institutions, while 5% were from Europe and the Middle East.

BofA Securities, previously Bank of America Merrill Lynch, alongside Societe Generale and Standard Chartered underwrote the bond sale. Hyundai Assan plans to use the $300 million as working capital.

S&P rated the bonds at BBB, the same as the parent Hyundai Motor's, saying the South Korean automaker group’s loan ratio is low, reducing the risk that senior unsecured bondholders will be at a disadvantage to other creditors.

Hyundai Assan is a production joint venture which Hyundai Motor set up with Kibar Holding of Turkey in 1997. Its Izmit plant with an annual capacity of 230,000 unit produces Hyundai’s small hatchbacks i10 and i20. Last year, Hyundai Motor bought 27% in the JV from Kibar, which had held a 30% stake in the plant.

Write to Hyun-il Lee at

Jongwoo Cheon edited this article

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