South Korea's largest provider of integrated telecommunications services, in terms of revenue, KT Corporation, on April 14 priced a dual-tranche US$1 billion bond offering, which saw a strong participation by US investors in the shorter-dated paper.

The Reg S/144A transaction comprised of US$650 million for three years, which was priced at 99.791% with a coupon of 1.75% to offer a yield of 1.822%. This represented a spread of 100bp over the US treasuries, or at the tight end of the final price guidance of 105bp area (+/- 5bp).

The remaining US$350 million was for five years and was priced at 99.642% with a coupon of 2.625% to offer a yield of 2.702%. This was equivalent to a spread of 110bp over the US treasuries, also at the low of the final price guidance of 115bp area (+/- 5bp). The bonds moved into opposite direction in the early morning session in Asia on April 15, with the three- year bonds tightening by another basis point, while the five years widened by 2bp.

In terms of comparables, the existing Korea Telecom's 3.875% US$350 million January 2017 bonds, before the deal announcement, were trading at 141bp over the US treasuries, which was equivalent to a G-spread of 107bp. Effectively, the new three-year bonds were priced 7bp through the existing bonds, which was a good outcome for KT, says a banker familiar with the transaction.

In launching the transaction, KT did a fairly comprehensive roadshow visiting investors in Hong Kong, Singapore, New York, Boston, Chicago and London. It announced the deal in Asia morning of April 14 with an initial price guidance of 120bp area for the three years and 130bp area for the five years.

It immediately built momentum soon after announcement and by 2pm, the arrangers - Bank of America Merrill Lynch, Citi, Deutsche Bank, Goldman Sachs and HSBC - announced to the market that they have a combined order book of about US$1.5 billion.

The final demand eventually amounted to US$4.1 billion from 163 accounts. The participation of the US investors was quite notable, particularly in the three-year tranche, which they accounted for 70%, while those from Asia took 24% and Europe 6%. Asset managers bought 78%, banks 10%, insurance companies 9%, and private banks and others 3%.

"Many US investors prefer to take the shorter-dated paper and the support for this tenor makes it such a desirable maturity at the moment for the issuers to price into," the banker adds.

Asia got the biggest allocation for the five-year tranche with 40%, followed by US with 35% and Europe 25%. By type of investors, asset managers bought 51%, banks 21%, insurance companies 15%, and private banks and others 13%.

Proceeds from the transaction will be used to repay KT's existing debt and for the company's general corporate purposes.