Cross-Border Investment Banking and Capital Raising
Domain 4 covers how issuers raise capital outside their home market and how those transactions are priced and distributed. The exam tests instrument choice, offering exemptions, deal mechanics, and the dilution and cost arithmetic behind a capital-raising decision.
Routes and instruments
- Equity: KOSPI/KOSDAQ IPO with book-building and a 15% greenshoe; ADRs and GDRs; Reg S and Rule 144A placements for US and offshore investors.
- Debt: Eurobonds and global bonds, samurai (yen) bonds, kimchi bonds (won by foreign issuers), panda bonds (renminbi), syndicated loans, and project finance through an SPV with DSCR covenants.
- Pricing anchors: DCF and EV/EBITDA comparables for equity; spread over US Treasuries, SOFR or KTBs for debt.
Worked example
A 20 million share IPO priced at KRW 30,000 raises KRW 600bn. The 15% greenshoe adds 3 million shares, so the issuer can raise up to KRW 690bn if demand supports stabilisation. Separately, an issuer weighs a USD bond at 5.2% against a KRW bond at 3.9%. If the won is expected to depreciate 2% a year, the unhedged dollar all-in cost is (1.052 × 1.02) − 1 = 7.3%, well above the won bond; hedging through a cross-currency swap restores a cost close to the dollar coupon plus the basis, which is the correct comparison.
Traps that cost marks
Assuming a higher offer price is better - it can break the issue and damage the aftermarket; ignoring dilution from the greenshoe and options; mixing up Rule 144A (QIBs) and Reg S (non-US persons) eligibility; confusing enterprise value with equity value in multiples; comparing debt costs across currencies without a hedge or an FX assumption.