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| The headquarters of Korea Gas Corp. (KOGAS) in Daegu/ Courtesy of KOGAS |
By Lee Kyung-min
Korea Gas Corp. (KOGAS) said Thursday that it issued global bonds of $800 million (912 billion won) July 6 (local time) with the record-narrow credit spread among state-run firms here, a notable feat as indicated by global investors demanding up to five times the initial amount offered by the state-run organization.
The yield spread or credit spread is the difference between a corporate bond’s yield to maturity and that of a U.S. Treasury bond or note with a similar maturity date.
The spread for the dual-tranche issuance of $4.5 billion five-year maturity bonds and $3.5 billion 10-year maturity bonds will be 0.375 percentage points higher and 0.65 percentage points higher than the respective U.S treasuries with the same maturities. The former offers a coupon rate of 1.125 percent, and the latter 2 percent.
This comes two years after July 2019 when the state-run entity issued $500 million in global bonds.
The most significant point in the dual-tranche issuance, it said, is that the credit spread of 65 basis points is lower than the corporation’s distribution yield of 70 basis points, meaning the corporation set a strong benchmark for the 10-year-maturity state-run organization-issued bonds that have long been scarce in the global financial market.
The firm attributed the successful issuance of the bonds to a series of online events held this year to better connect with overseas investors, a marked change in marketing strategy from a year earlier when almost all investor relations events were canceled due to the COVID-19 pandemic.
Many investors showed keen interest in the firm’s environmental, social and corporate governance (ESG) standards, propped up by continued demand for the natural gas business that is expanding to include production, supply and distribution of hydrogen.
Further underpinning the sustainability-oriented corporate vision and business models was Korea’s excellent containment measures, as evidenced by the country’s GDP shrinking only 1 percent last year, a figure sharply contrasted with other G20 countries averaging a 3.2 percent contraction.
Also bolstering investor confidence is Korea’s credit default swap (CDS) premium, an indicator that shows the country’s risk of national bankruptcy, standing at 18 basis points as of June, the lowest level since the outbreak of the pandemic. The lower the figure, the lower the risk.
Up to 90 institutional investors placed purchase orders including asset management firms, banks, central banks, international organizations, insurance firms and pension funds. They were from Asia, Europe, the Middle East and the U.S.
“The successful issuance of government-issued foreign exchange bonds led to the issuance of our global bonds at cheaper borrowing costs,” a KOGAS official said.
The Ministry of Economy and Finance announced the dual-tranche issuance of $1.45 billion in foreign exchange stabilization fund bonds (forex bonds) with the record-low yield last September. The bonds comprised $625 million in 10-year dollar-dominated bonds with a yield of 1.198 percent and 700 million euros in five-year euro-denominated bonds with a negative yield of 0.059 percent.
The underwriters include BNP Paribas, Citigroup, Credit Agricole, JP Morgan, UBS, KB Securities, Korea Development Bank and Mirae Asset Securities.
Korea Gas Corp. issues global bonds worth $800 million
Source: Buhay Kapa PH
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