GS Caltex raises $300 mn in 5-year debt at 3.98%

South Korea’s second largest oil refiner GS Caltex Corp. raised $300 million in five-year dollar-denominated bonds at a cheaper-than-expected rate amid solid earnings outlook from the strengthening in oil prices.

According to investment banking sources on Thursday, the Korean company issued five-year bonds at a coupon of 3.98 percent, 120 basis points above the five-year U.S. Treasury yield. Pricing was more favorable than the projected 150 basis point spread due to oversubscription.

Citigroup Global Markets Korea Securities, BNP Paribas and HSBC were joint bookrunners.

This is the company’s second international bond issue this year, following the $100 million offering in Swiss franc in April.

GS Caltex turned aggressive in the debt market upon upgrades by credit rating agencies. In February, Moody’s raised its rating of the oil refiner from Baa2 to Baa1, followed by S&P’s upgrade from BBB to BBB+ in March.

The company has enjoyed robust profits thanks to recovery in the oil market. It raised over 2 trillion won in 2016 and 2017 on the back of the oil price rebound. Thanks to its surging profits, it was able to cut down its debt by 1 trillion won in 2017 against the previous year.

Moody’s projected the firm would maintain its current financial stability and cash flow over the next couple of years. Although pared from 2017, its earnings this year are expected to stay above the 2012-2015 average.

Korea’s largest oil refiner SK Innovation Co. is also readying an offering next week to refinance its 2013-issued $350 million debt.

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