More Korean issuers push sustainability bonds
Posco prices a five-year US$500 million bond, which is its first-ever sustainability bond, while Kogas intends to launch a 10-year one
More Korean issuers are joining the bandwagon in issuing sustainability bonds, setting the benchmark for other potential issuers.
The latest issuance came from Posco, which priced on July 8 a US$500 million offering. The five-year Reg S/144A deal was priced at 99.426% with a coupon of 2.75% to offer a yield of 2.874%. This was equivalent to a spread of 105bp over the US treasuries, which was in line with the final price guidance, and 25bp inside of the initial guidance of 130bp area.
The transaction represents the first-ever sustainability bond offering by Posco in the debt capital markets and the first-ever sustainability bond issued by a global steel-making company.
In executing the deal, Posco managed to overcome the uncertainty surrounding the US-China trade negotiations and the rising US dollar rates volatility due to global growth concerns. It generated an order book in excess of US$1.9 billion from over 100 accounts with 65% of the bonds allocated in Asia, 28% in the US and 7% in EMEA.
By type of investors, fund and asset managers accounted for 58% of the paper, while insurance companies and pension funds took 24%, bank treasury 14%, and private banks and other investors 4%.
Posco CEO Choi Jeong-Woo says the bond issuance further strengthens the company’s ability to invest in energy and environment, and Posco plans to allocate the net proceeds towards the financing or refinancing, in whole or in part, of new or existing projects related to electric vehicle batteries, renewable energy, employment for the underprivileged, support small and medium-sized enterprises, and financing new business ventures and start-ups.
The bonds were issued from the new sustainable financing framework established by Posco in April 2019, which include the ESG bond issuance’s purpose and its monitoring plans, with the external review from Sustainalytics.
Bank of America Merrill Lynch, BNP Paribas, HSBC and Standard Chartered acted as the joint bookrunners and lead managers for the transaction.
Another Korean issuer, Korea Gas Corporation (Kogas), is also in the market with another sustainability bond. It is looking to price a 10-year Reg S/144A offering with an initial price guidance of 120bp area over the US treasuries. The deal is being arranged by Bank of America Merrill Lynch, BNP Paribas, Citi, HSBC and Korea Development Bank.
The bonds will be issued under Kogas’ existing US$11 billion medium-term notes programme and the proceeds will be used to finance and/or refinance new and existing projects from eligible project categories in accordance with the company’s sustainability bond framework.
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