Posco Hires Banks for Investor Talks, Plans Bond Sale

By Sungwoo Park and Patricia Kuo

March 12 (Bloomberg) -- Posco, Asia’s third-largest steelmaker, hired five banks to arrange meetings with investors that may lead to a bond sale for working capital.

Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc and Merrill Lynch & Co. will organize the meetings between March 16 and March 18, according to an e-mail sent to investors today. A bond sale will follow “subject to market conditions,” it said.

“Posco has a strong credit profile, but is operating in the commodity sector and its product prices are falling due to the global economic slowdown, so it would be difficult to gauge how successful this transaction will be,” said Scott Bennett, a fund manager with Aberdeen Asset Management Asia Ltd. who oversees $800 million of Asian debt.

Pohang, South Korea-based Posco slashed production in December for the first time in its 40-year history, joining moves by ArcelorMittal and Nippon Steel Corp., the world’s biggest steelmakers, as the global recession cooled demand. The company may cut production by 6 percent this year should the demand slump continue until June, Chief Executive Officer Chung Joon Yang said last month.

Posco plans to meet investors in Singapore on March 16, Hong Kong on March 17 and London on March 18, with simultaneous talks in Los Angeles, Boston and New York, said two people familiar with the schedule, who asked not to be identified because the meetings are private.

Firm Plans

While Posco is considering bond sales at home and overseas it hasn’t yet made firm plans, spokesman Choi Doo Jin said in a phone interview today. Korean-language Edaily today said the steelmaker aims to sell as much as $700 million of bonds next week, without saying where it got the information.

Posco’s $300 million in 5.875 percent bonds maturing 2016 were quoted at 631 basis points above U.S. Treasuries today, down from 636 yesterday, according to Royal Bank of Scotland Group Plc prices. A basis point is 0.01 percentage point.

Standard & Poor’s, which rates Posco’s debt A, the sixth- highest investment grade, said in December that the company benefits from strong cash flow, although capital expenditure and other investment outlays are rising.

“Even if Posco increases its level of debt, the company should face no significant difficulties in accessing local or overseas debt markets,” S&P said on Dec. 22.

Posco had a net profit of 721 billion won ($485 million) in the fourth quarter ended Dec. 31, compared with 713 billion won a year earlier.

To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.netPatricia Kuo in Hong Kong at pkuo2@bloomberg.net.