Korea Investment & Securities has secured nearly 2.5 trillion won in orders during its second corporate bond demand forecast of the year. After posting record quarterly earnings, the brokerage drew firm institutional demand on rising expectations over its business momentum.
According to investment banking sources on Wednesday, Korea Investment & Securities conducted a demand forecast targeting institutional investors to raise 250 billion won. Institutions placed orders totaling 2.495 trillion won. Specifically, the two-year tranche drew 1.14 trillion won against a 100 billion won offering, while the three-year tranche attracted 1.355 trillion won against a 150 billion won offering.
With strong demand confirmed, the bonds are expected to price below market trading levels. Ahead of the demand forecast, Korea Investment & Securities set its target yield band at -30 to +30 basis points (1bp = 0.01 percentage point) over its individual fair-value yield, the proprietary rate set by private bond pricing agencies. The demand forecast results showed that both the two-year and three-year tranches filled their offerings at -7bp versus the fair-value yield for the same maturity.
Backed by strong credit quality and a record first-quarter performance, the brokerage was able to secure more demand than the 1.4 trillion won received during the January demand forecast, analysts said. Korea's three domestic credit rating agencies rate Korea Investment & Securities at "AA0, stable." The company posted record-high consolidated operating profit of 959.9 billion won and net profit of 784.7 billion won in the first quarter alone.
Korea Investment & Securities plans to use the proceeds from the public bond issuance for debt repayment, refinancing 470 billion won in corporate bonds maturing on July 9 this year. The company has indicated it could increase the issuance size to as much as 500 billion won depending on the demand forecast results, raising the possibility of expanding the offering to match the refinancing amount. The bond issuance is being jointly managed by Kiwoom Securities, NH Investment & Securities, KB Securities, Daishin Securities, Meritz Securities and SK Securities.
