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Bank sells dollar bonds with guarantee

SOUTH Korea's Hana Bank is selling up to US$1 billion in dollar bonds with a government guarantee, a source with knowledge of the deal said, becoming the first lender to tap the country's debt guarantee program.

Hana will join a global wave of government-backed debt issuance from financial firms this year, and its action could spur other South Korean lenders to follow up with similar sales in a country eager to secure dollars.

The lending unit of Hana Financial Group is selling US$500 million to US$1 billion in three-year bonds at a yield of 500 to 525 basis points over midswaps, said the source, who was not authorized to speak to the media about the sale.

The price guidance range is equivalent to a yield of around 6.7 to 7.2 percent.

Analysts had previously expected Hana to sell the bonds at around midswaps plus 530 basis points.

Hana's sale has already attracted more than US$5 billion in orders, according to the source, ahead of pricing that was expected later yesterday, during United States trading hours.

South Korean banks have struggled to raise dollars to refinance maturing debt as the global financial crisis had made investors wary of lending to riskier emerging economies.

An export slump has also dented the South Korean won - which earlier this year fell to an 11-year low and is still down off more than 20 percent in the past year - making it more costly for lenders to refinance their overseas debt.

Hana will become the first lender to tap into a US$100-billion debt guarantee program set up in October that provides state backing for overseas bond sales for up to three years, though it imposes some conditions such as a fee for the issuer.

Still, South Korean lenders have been wary of tapping the program on concerns it would lead to increased government interference into their operations.


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