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(Updates with investor comment in fourth paragraph.)
Oct. 14 (Bloomberg) -- Posco, the world’s third-biggest steelmaker, sold 41.4 billion yen ($538 million) of Samurai bonds, paying a higher relative yield than initially planned amid concern Europe’s debt crisis will derail global growth.
Posco, based in Pohang, South Korea, offered 30 billion yen of three-year, 1.67 percent bonds priced to yield 125 basis points more than the yen swap rate, and 11.4 billion yen of five-year, 2.03 percent notes at a spread of 150 basis points, according to data compiled by Bloomberg. Initial price guidance on the five-year tranche was between 100 and 140 basis points, a person with direct knowledge of the matter said Oct. 4.
The extra yield investors demand to own Samurai bonds instead of Japanese government debt has almost doubled to 144 basis points from this year’s low of 74 on June 15, according to a Nomura Securities Co. index. Government-owned Korea Development Bank raised 53.7 billion yen in a four-part offering of Samurai bonds on Oct. 12, paying a spread of 140 basis points on the five-year tranche, Bloomberg data show.
“Investors weren’t satisfied” with Posco’s initial price guidance and wanted a wider spread than Korea Development Bank offered, Toshiaki Takahashi, who manages 340 billion yen at Meiji Yasuda Life Insurance Co., said in a telephone interview from Tokyo today. While KDB “isn’t involved with Europe’s most- indebted countries, as a financial institution its spreads got wider because of the risk-off trend. Posco is also from Korea and is a private-sector company,” said Takahashi, who bought the steelmaker’s notes.
Chung Jae Woong, a spokesman for Posco, had no immediate comment on the sale details when contacted by telephone at the company’s head office today.
Posco last issued Samurai bonds, or yen-denominated debt sold in Japan by an overseas borrower, in 2006, Bloomberg data show. The steelmaker then raised 50 billion yen from a sale of seven-year, 2.05 percent bonds at a spread of 32 basis points.
Sales of Samurai bonds by Korean borrowers have totaled a record 370 billion yen this year, the data show.
Overseas borrowing costs have surged for Korean companies this half, with average yields on dollar debt rising 63 basis points to 4.18 percent, according to HSBC Holdings Plc data.
--With assistance from Sungwoo Park in Seoul. Editors: Edward Johnson, Shelley Smith
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