Hyundai Engineering to double AA-offering, Korean Air taps ESG debt market

[Source: Hyundai Engineering & Construction Co.]

South Korea¡¯s Hyundai Engineering & Construction Co. is mulling to double its AA- multi-tranche offering upon receiving 3.5-times oversubscription from institutions and Korean Air Lines Co. readies maiden environment, society and governance (ESG) papers as risk-taking investor appetite for sub-investment grade debts has revived amid volatility from tightening signal from U.S. and Korean central banks.

Hyundai Engineering & Construction Co. which initially set out to raise a total 150 billion won ($132.07 million) in AA-rated three-tranche bonds is considering doubling the issuance after attracting 520 billion won orders during a book-building session on Wednesday.

The offering of 60 billion won in three-year bonds drew as much as 200 billion won bids, 60 billion won in five-year maturity 210 billion, and 30 billion won in seven-year bonds 110 billion won. Demand for the longer-dated seven-year notes was particularly strong thanks to the company¡¯s solid performance, enabling it to price them at 15 basis points below the market average. The three-year debts will be priced at 2 basis points above the market average and the five-year bonds at the market average.

Korean Air"s Boeing 787-9 aircraft. [Photo by Korean Air Lines Co.]

Flag carrier Korean Air Lines will tap the ESG bond market becoming the first green bond issuer in the aviation industry.

According to industry banking sources on Wednesday, Korean Air Lines is planning an offer of 200 billion won in BBB+ upon gaining confidence in the offering of 350 billion won in three-tranche notes in April.

The book-building for the new offering in one and a half, two and three-year maturities will separately take place by bookrunners KB Securities, NH Investment & Securities, Korea Investment & Securities, Mirae Asset Securities, Kiwoom Securities, and DB Financial Investment.

The new issue may be scaled up to 400 billion won upon demand.

Korean Air¡¯s BBB+ issue is expected to draw heated demand from investors on the back of investors¡¯ renewed appetite for high yield bonds and government policy support.

In April, the flagship carrier increased its initial offering of 200 billion won to 350 billion won after attracting more than 600 billion won orders.

Of the 200 billion won new offering, the issuer has not decided yet how much will be raised in ESG-themed notes, industry sources say.

Korean Air is planning to use proceeds raised through ESG bonds to buy eco-friendly Boeing 787-9 aircrafts which emit less carbon. The airline currently operates 10 units of the B787-9 model. The rest of the proceeds will be used to repay debts.

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