EM ASIA CREDIT: Korean Air Lines: New $ Mandate FV
(KOREAN, Aa2/AA/NR)
New Issue: $TBA 5Y
FV estimate: Z+80bp area.
Korean Air, which operates a fleet of 138 passenger and 23 cargo aircraft, has mandated banks for a new 5-year USD bond deal that may launch next week. The bonds to be issued will benefit from an unconditional and irrevocable guarantee provided by the government-owned Korea Development Bank (KDB).
For fair value estimation of the potential issuance, we focus on the existing KDB curve and other KDB-guaranteed issuers, including Hanwha Futureproof Corp., Korea Electric Power Corporation, Kraton Corp., Hyundai Heavy Industries, and Doosan Enerbility.
These guaranteed issuers are currently trading around 20–25bp wide of the KDB curve. We expect Korean Air’s 5Y deal to price in a similar range, and use the recently launched KDB 5-year bond as an anchor. Fair value therefore around z+ 80bp.
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