Large-scale funds flocked to Korea Financial Group and Korea Zinc to predict demand for corporate bonds

Korea Financial Group [071050] (AA-)'s demand forecast for unsecured bonds attracted more than seven times the amount expected to be raised.

According to the investment banking (IB) industry on the 1st, Korea Financial Group confirmed a total demand of 1.84 trillion won in its demand forecast for the issuance of corporate bonds worth 250 billion won.

Korea Financial Group said it could consider issuing increased amounts up to 500 billion won depending on the demand forecast results.

By maturity, 905 billion won came in for 2-year bonds raising 130 billion won, and 935 billion won came in for 3-year bonds raising 120 billion won.

The additional interest rate (spread) for 2-year bonds was formed at a level that was 16bp (1bp = 0.01% point) lower than the individual average interest rate, and for 3-year bonds, it was formed at a level that was 15bp lower than the average rate.

Korea Financial Group has proposed ±30bp compared to the arithmetic mean of individual public average returns as the desired interest rate for public offering.

Korea Financial Group announced that it plans to use the raised funds to repay 300 billion won of commercial paper (CP) securities maturing in November.

There are five underwriters, including Shinhan Investment & Securities, KB Securities, NH Investment & Securities, Kiwoom Securities, and Hana Securities.

On this day, Korea Zinc (AA+) also began demand forecasting.

On this day, Korea Zinc received 482 billion won in demand in its demand forecast for the issuance of 150 billion won worth of 5-year corporate bonds.

Korea Zinc plans to consider increasing the amount from the limit of 300 billion won according to the demand forecast results.

The spread was formed at a level 8bp lower than the individual average interest rate.

Korea Zinc also plans to use the funds raised to repay debt maturing in the middle of this month.

The underwriters are KB Securities and Hana Securities.

Meanwhile, JB Financial Group (A+) participated in a total of 103 billion won in demand forecasting results for hybrid capital securities worth 100 billion won. The interest rate is scheduled to be set at 5.90%.

JB Financial Group presented the desired public offering interest rate as 5.20-5.90% when forecasting demand, so the interest rate was decided at the upper end.

Lee Seung-jae, a researcher at iM Securities, said, “Although corporate bond carry (interest income) was good throughout this year, there was not a lot of volume.” He added, “It appears that there was a lot of demand because interest rates were high for high-grade issuances such as Korea Financial Group and Korea Zinc.”

He added, “Issuers seem to be speeding up as the Monetary Policy Committee becomes more cautious as we move into the holiday season next week and the second half of October.”