[Asia Economy Reporter Jo Gang-wook] Following the policy banks, commercial banks have recently succeeded in issuing foreign currency bonds one after another, signaling a positive turn for the domestic bond market, which had been in a state of emergency over securing foreign currency liquidity.
This is expected to have a positive impact on the domestic bond market, which had frozen due to the aftermath of the novel coronavirus infection (COVID-19), and to provide warmth to domestic companies struggling with financing.
According to the financial sector on the 26th, KB Kookmin Bank successfully issued a 5-year senior global bond (144A/RegS) worth 500 million dollars on the 23rd.
In particular, this issuance is in the form of a COVID-19 response sustainable bond. It is the first COVID-19 response bond among foreign currency global public bonds issued by domestic issuers.
The issuance interest rate was set at an annual 1.872%, which is the US Treasury 5-year bond yield plus 150 basis points (142 basis points added based on the 3-month LIBOR), and it will be listed on the Singapore Exchange.
KB Kookmin Bank explained that this issuance led to strong demand based on its representativeness as the first Korean won fixed-rate 5-year bond issued by a commercial bank after COVID-19.
A KB Kookmin Bank official said, "We secured orders exceeding about 3.9 billion dollars from a total of 181 institutions (7.8 times the issuance amount)," adding, "The spread was also reduced by 45 basis points compared to the initially proposed rate (initial guidance)."
Earlier, Shinhan Bank succeeded in issuing a 5-year foreign currency Formosa bond worth 500 million dollars on the 9th. It was Shinhan Bank’s first Formosa bond issuance, with an interest rate set at the USD 3-month LIBOR plus 1.70%.
In particular, this bond was the first public bond issuance by a domestic private financial institution after the full-scale spread of COVID-19. Shinhan Bank explained that despite the market uncertainty being at its peak, it attracted 4.2 times the orders compared to the issuance amount and successfully completed the issuance without paying a new issue premium.
On the 7th, the Korea Development Bank (KDB) succeeded in issuing a global bond worth 500 million dollars. This was the first dollar-denominated bond issuance by a domestic financial company since the COVID-19 outbreak intensified.
In the demand forecast, KDB initially proposed an issuance amount of 300 million dollars and a rate guideline of LIBOR plus 1.80%. However, by attracting about 4.6 times the orders compared to the issuance amount, KDB increased the issuance amount to 500 million dollars and lowered the interest rate by 0.35 percentage points.
Additionally, on the 23rd, KDB also succeeded in issuing a Swiss franc-denominated bond worth 310 million dollars.
A KDB official said, "With this Swiss franc-denominated bond issuance, we reaffirmed investors’ trust in high-grade Korean bonds not only in major markets such as the US, Europe, and Asia but also in niche local markets like Switzerland."
The Export-Import Bank of Korea (KEXIM) also succeeded on the 20th in simultaneously issuing dollar-denominated (700 million dollars) and euro-denominated (700 million euros) bonds totaling 1.46 billion dollars (approximately 1.8 trillion won) to global investors.
Among these, the euro-denominated bond is a green bond and is the first euro bond issued by a Korean institution since the spread of COVID-19. Green bonds are special-purpose bonds that limit the use of funds raised through bond issuance to support low-carbon and eco-friendly industries such as alternative energy and climate change response, and issuers require international certification of their green status.
KEXIM explained that through this issuance, it has succeeded in issuing bonds in the euro bond market for five consecutive years since 2016, solidifying its status as a representative Korean borrowing institution.
KEXIM plans to actively support the overseas expansion of Korean companies struggling due to the COVID-19 crisis by utilizing the proceeds from this foreign currency bond issuance. Additionally, the proceeds from the euro green bond will be fully used to support eco-friendly industry projects such as renewable energy and secondary batteries.
As the COVID-19 crisis spread worldwide, overseas dollar-denominated bond issuance by Korean institutions had been suspended since KDB’s 1.5 billion dollar global bond issuance on February 10. However, after KDB’s 500 million dollar public bond issuance on the 7th, overseas public bond issuances by domestic financial institutions such as Shinhan Bank, KEXIM, and KB Kookmin Bank have been gaining momentum.
A financial sector official said, "Despite the ongoing financial market instability following the spread of COVID-19, it is meaningful to confirm that investment demand for Korean bonds remains solid," adding, "This will particularly contribute significantly to improving issuance conditions and reducing spreads in the overseas Korean bond market."
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