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Hotel Shilla bond sale oversubscribed amid recovery in leisure demand Bids totaling $726 million received with oversubscription rate of almost four times

Translated by Ryu Ho-joung 공개 2022-04-25 08:10:20

이 기사는 2022년 04월 25일 08:07 더벨 유료페이지에 표출된 기사입니다.

Hotel Shilla, which operates duty-free outlets and high-end hotels, has seen strong investor demand in its bond sale as the travel industry recovers from Covid-19.

The offering attracted 900 billion won ($726 million) in orders during bookbuilding on April 20, meaning the deal was almost four times oversubscribed, according to sources.

The South Korean issuer’s three tranches of notes with 2-year, 3-year and 5-year maturities received orders worth 310 billion won, 530 billion won and 60 billion won, respectively, compared to original targets of 70 billion won, 150 billion won and 30 billion won.

The 2-year and 3-year tranches increased to 120 billion won and 200 billion won, respectively, bringing the total raised to 350 billion won.

The 2-year note was priced on par with the average yield calculated by four major local credit rating agencies. Final prices were set at 5bp below the average yield for the 3-year and 13bp over the average yield for the 5-year.

“Asset managers, securities firms and banks piled into the 2-year and 3-year notes, while the 5-year attracted orders mainly from insurance companies,” an investment banking source said.

“Strong demand indicates investors are upbeat about Hotel Shilla’s earnings prospects as expectations are rising that the coronavirus pandemic would soon become endemic.”

Hotel Shilla said during its latest investor call that, with Covid-related restrictions getting lax, it was well positioned to benefit from an increase in international flights and pent-up travel demand. The company also expected continued improvement in earnings. It swung back to profits last year thanks to cost reduction after a loss in 2020 when the company was hit hard by the outbreak of coronavirus.

Cheaper prices also attracted investors. Hotel Shilla’s notes trade at 20-30bp higher than other AA- rated tranches. “Investors might have thought that the deal was an opportunity to bargain hunt,” an industry insider said.

The deal marked the company’s first issue of a 2-year note. “Investor demand for shorter-dated notes is increasing and Hotel Shilla doesn’t have to issue longer-dated debt at a high yield either,” said the industry insider.

The proceeds from the bond sale, which will be completed on April 28, will be used for repayment of existing debt and general corporate purposes. Korea Investment & Securities, KB Securities and NH Investment & Securities are joint bookrunners. (Reporting by Ji-hye Lee)
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