[Exclusive] Shinhan Bank Successfully Issues $500 Million Formosa Bonds

First Foreign Currency Bond by Commercial Banks Since COVID-19 Crisis
Record-High Issuance of Korean-Linked Formosa Bonds

[Asia Economy Reporter Kangwook Cho] Shinhan Bank has successfully issued $500 million (approximately 610 billion KRW) worth of dollar bonds. This is the first issuance of dollar-denominated bonds by a domestic commercial bank since the outbreak of the novel coronavirus (COVID-19) pandemic. Notably, this is also the first foreign currency bond issuance by a commercial bank this year. Following the state-run Korea Development Bank, commercial banks are proactively securing foreign currency liquidity, which is expected to reduce the burden on domestic companies in raising overseas funds in the future.

According to the financial sector on the 9th, Shinhan Bank issued Formosa bonds worth a total of $500 million the previous day. This is Shinhan Bank's first Formosa bond issuance, with a 5-year maturity and an issuance rate set at 1.7% above the 3-month LIBOR. Initially, the market expected the issuance size to be around $300 million, but due to purchase orders exceeding $2.1 billion (approximately 2.562 trillion KRW) during the demand forecast (pre-subscription), Shinhan Bank increased the issuance size to $500 million. This is the largest issuance size ever for Korean Formosa bonds.

Formosa bonds refer to bonds issued by foreign institutions in the Taiwanese capital market in currencies other than the New Taiwan Dollar. Major investors include Taiwanese banks and insurance companies, which have abundant demand for foreign currency assets. It was confirmed that investors from the U.S. and Europe also flocked to Shinhan Bank's Formosa bond issuance. Citigroup Global Markets Securities, Cr?dit Agricole, and HSBC participated as joint lead managers.

A Shinhan Bank official explained, "In a situation where market uncertainty was maximized due to the impact of COVID-19, we attracted orders exceeding 4.2 times the issuance amount," adding, "It was issued at the largest scale ever for Korean Formosa bonds."

Domestic financial institutions' issuance of dollar-denominated public bonds had been interrupted since the outbreak of COVID-19, following the Korea Development Bank's $1.5 billion global bond issuance on February 10. Subsequently, on the 7th, the Korea Development Bank re-entered the overseas bond market by issuing Eurobonds worth $500 million to Asian and European investors. The Export-Import Bank of Korea is also expected to issue foreign currency bonds soon.

With the successful issuance of dollar bonds by the Korea Development Bank and Shinhan Bank, it is anticipated that foreign currency bond issuances by the Export-Import Bank as well as other commercial banks and companies may accelerate.

A financial sector official said, "In Shinhan Bank's case, targeting Formosa bond issuance to Taiwanese investors, who relatively have abundant foreign currency liquidity, was effective," adding, "This has turned on a green light for domestic private financial institutions to re-enter the global capital market in the future."