Korea National Oil Corporation US$1 billion five-year fixed-rate notes

Joint bookrunners: BoAML, Barclays Capital, HSBC, Korea Development Bank, RBS

In what was considered the deal that re-opened the US dollar bond public primary market in Asia ex Japan, the state-owned Korean National Oil Corporation (KNOC) priced on October 19 a five-year US$1 billion offering that attracted strong investor demand as it captured a window of opportunity in the tough market environment.

The market had been muted since the issuance by the Export-Import Bank of Korea in early September, also for US$1 billion, which did not perform well as the overall market declined.

The KNOC offering was priced at 99.387% with a coupon of 4% to offer yield of 4.137% – equivalent to a spread of 310bp over the US treasuries.

Ahead of the transaction, the company met with global fixed-income investors in Asia, Europe, the Middle East and the US through a non-deal roadshow held in mid-September.

The deal represents KNOC’s first US dollar public bond offering in 2011.

The company announced the transaction in the Asia morning of October 19 and it immediately gained traction among the investors given the absence of a true benchmark bond for quite a while. Within two hours, the book was already covered for a US$1 billion deal.

When London opened, the Asian books alone exceeded the US$3 billion mark with Europe adding another US$1 billion in the morning session.

The final guidance was revised down to between 310bp and 320bp and within two hours of the opening of the US market, the order book surged to US$8 billion. With such kind of demand during the 12-hour bookbuilding period, KNOC achieved a larger-than-initially planned issue size of US$500 million.