Despite Increased Financial Market Volatility, First Basel III Eligible Dollar-Subordinated Contingent Convertible Bonds Issued at 2% Range
Successful Attraction of Prime Dark Green Investors Through Excellent ESG Management Performance and Outcome Management
[Asia Economy Reporter Kwangho Lee] Shinhan Financial Group announced on the 6th that it successfully issued Basel III-compliant foreign currency Additional Tier 1 (AT1) contingent convertible bonds worth USD 500 million at a historically low global interest rate.
This bond was issued in the form of a sustainability bond and includes a call option allowing redemption after 5 years.
The issuance rate was set at 2.875%, with orders totaling USD 3.9 billion?eight times the issuance size?resulting in a 52.5 basis points reduction from the initial offered rate. This is the lowest rate ever recorded for AT1 bonds issued in the global dollar market and the first case to achieve a rate in the 2% range.
Despite increased market volatility due to recent U.S. fiscal stimulus measures, inflation expectations, and concerns over defaults by large Chinese bad banks, Shinhan Financial Group attracted strong investor demand by receiving high evaluations for its world-class profitability and soundness secured through proactive capital expansion over the past two years.
Since issuing the first AT1 bond among domestic financial holding companies in 2018, Shinhan Financial Group has issued foreign currency bonds for four consecutive years, which positively influenced this successful issuance. Continuous communication with the global market enhanced the company’s transparency and recognition, enabling it to secure global top-tier investors even in challenging market conditions.
This bond is the second sustainability bond issued following the subordinated bond issued in 2019. From the outset, the company actively sought ESG-related investors to maximize the bond’s characteristics. As a result, it attracted approximately 30% of Dark Green investors, who have stringent ESG evaluation criteria, thereby enhancing the group’s credibility in eco-friendly businesses in the global market.
Going forward, Shinhan Financial Group plans to utilize the raised funds in line with the issuance purpose, supporting financially marginalized groups such as low-income households and small and medium-sized enterprises, as well as promoting various ESG projects including environmental improvement and renewable energy businesses.
The successful AT1 issuance also improved Shinhan Financial Group’s financial indicators. The group’s BIS capital adequacy ratio is expected to rise by 0.22% from the end of March to 16.12%, and the double leverage ratio is projected to improve by 2.43% to 112.96%.
A Shinhan Financial Group official stated, “This issuance not only reaffirmed overseas investors’ trust but also strengthened our accessibility to the global funding market, creating an opportunity to diversify bond underwriters and issuance strategies beyond the domestic market. We plan to discover various investment opportunities to efficiently utilize the raised funds for projects that protect the environment and create social value.”
Meanwhile, BNP Paribas, Citigroup, Credit Suisse, HSBC, and Mizuho Securities participated as joint lead managers, with Shinhan Investment Corp. acting as a co-lead manager for this issuance.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
