Korea Highway Corp.'s European non-deal roadshow to go on despite N. Korean missile-test incident

By Paul A. Harris

St. Louis, July 6 - South Korea's Korea Highway Corp. is poised to hold a Europe-only non-deal roadshow despite geopolitical jitters resulting from the recent missile tests by North Korea, according to an informed source.

News reports from around the world began to surface early Wednesday stating that North Korea had test-fired at least half a dozen ballistic missiles including a failed and/or aborted test of a long-range missile.

However, the source, an emerging markets syndicate official, said that market participants at this point seem undeterred.

Korea Highway will pay visits to investors in Europe on a roadshow being led by Deutsche Bank, JP Morgan and UBS.

The presentations are expected to culminate in a deal, the source said. However details such as the denomination in which the company may elect to issue and the structure of the debt securities, remain to be determined.

On May 17, 2005 Korea Highway priced a $500 million issue of 5 1/8% 10-year senior fixed-rate notes (A3/A-/A) at 98.938 to yield 5.263%, 115 basis points over Treasuries, via Citigroup, JP Morgan and UBS.

Meanwhile, later on Thursday a trader who focuses on Asian fixed-income securities also said that while the missile tests caused some nervousness in Asia on Wednesday, the impact upon Korean spreads, which had already been somewhat more defensive just in the context of the overall market tone, did not seem significant.

The trader said that five-year Korean credit default swaps widened by 2 basis points to a mid-28 basis point context from a mid-26 basis point context after the missile tests took place. The source added that the effect was exaggerated further down the credit quality spectrum and further out along the maturity curve.

"This is an issue that has been out there for a long time," the trader asserted, adding that there had been a much greater impact upon Korean spreads in late 2002 and early 2003. It was during that period that North Korea removed International Atomic Energy Agency monitoring seals and cameras from its nuclear facilities, expelled the agency's inspectors, withdrew from the Nuclear Nonproliferation Treaty and announced it had reactivated its nuclear power facilities.

"That time you actually did see some spread-widening on geopolitical fears," the trader said.

"This incident seems to have to do with whether or not bi-lateral talks will take place between North Korea and the U.S., or whether there will be further multi-lateral talks. The market is used to these geopolitical issues."

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