APAC CREDIT PREVIEW: Korea Railroad reveals USD funding plans

Headlines (14-Apr-2025)

** USD bond issuance remains subdued despite constructive start to week in broader risk markets

** Korea Railroad Corporation announces its planned return to the USD market

The APAC USD primary market remains quiet today, continuing the subdued trend observed in recent weeks. So far this month, we have yet to see any regional benchmark USD issuance outside of Japan, with only sub-benchmark deals from Chinese LGFVs coming to the market.

However, with that said, the pipeline of regional USD issuers continues to grow, with Korea Railroad Corporation adding to the list of prospective issuers this morning, joining names such as Tongyang Life Insurance, KT&G Corporation, Korea Water Resources Corporation, Hana Securities and POSCO Holdings, to name a few.

Issuers are waiting for the right window to return to the market, in the wake of elevated broader volatility driven by tariff-related concerns.

And with investor caution on the rise, issuers may need to offer higher levels of spread compensation to mitigate any execution risk and support secondary market performance when the market does eventually re-open.

That as NICs were already trending higher in March as heightened volatility increasingly took its toll on the market. The average NIC paid by investment grade issuers in the final week of March was 6bp, based on available data, which while perhaps not huge by historical standards, was still the highest we’ve seen in any week since the one ending 13-Sep-2024, IGM data shows.

Korea Railroad Corporation announces its planned return to the USD market

Korea Railroad Corporation ("KORAIL"), rated Aa3 (Stable) by Moody’s and AA- (Stable) by Fitch, has mandated BNP PARIBAS, HSBC and Standard Chartered Bank to arrange a series of fixed income investor update calls commencing on April 15, 2025.

A USD-denominated Reg S only senior unsecured bond offering with expected tenor of 2- to 5-year FXD/FRN may follow, subject to market conditions.

This would mark KORAIL’s first USD bond offering since November 2019, based on our records, when it issued a US$150m 3mL+70 5-year senior unsecured note. The note has since matured in November 2024 and currently the issuer has no other outstanding benchmark USD bonds.

For pricing points of reference, we may look to recent transactions from other Korean state-owned corporates, such as the multi-tranche offering from Korea National Oil Corporation priced last month, and the 3-year note issued by Korea Electric Power Corporation in February, as follows:

**Potential Comps**

KOROIL (Aa2/AA/-) US$300m 4.625% 31-Mar-2028 @ T3+81 (Priced @ T+65 / 99.903 / 4.66%)

KOROIL (Aa2/AA/-) US$400m SOFR+77 31-Mar-2028 @ SOFR+95 (Priced @ SOFR+77 / 100)

KOROIL (Aa2/AA/-) US$300m 4.75% 31-Mar-2030 @ T5+90 (Priced @ T+70 / 98.811 / 4.793%)

KORELE (Aa2/AA/-) US$400m 4.75% 13-Feb-2028 @ T3+85 (Priced @ T+58 / 99.829 / 4.812%)

As seen from above, all of the aforementioned deals have since widened by 16-27bps in the secondary market.

That is also in line with the broader market trend, as highlighted by the Bloomberg Asia USD IG Bond Index Avg OAS (BAIGOAS) which closed out last week at 97.5bps, which is 7.94bps wider than the previous Friday’s closing level (04-Apr-2025). The index is also kicking-off the new week 31bps wide of its recent historically tight level of ca. 66.5bps posted on 19-Feb-2025.

Snapshot of APAC USD, EUR, CNH, CNY, HKD, SGD, AUD & NZD issues live on 14th Apr 2025 at the time of writing. Click on the links for the most recent updates:

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