KB, Shinhan, and Korea Securities Lead Global No.1 'Indonesian Pulp Company' Kimchi Bond Issuance

PT OKI Pulp & Paper Mills Issues $10 Million Dollar Bonds
Steady IB Sector Performance Including IPO and Acquisition Financing After Establishing Local Subsidiary

Major domestic securities firms such as Shinhan Investment Corp., Korea Investment & Securities, and KB Securities have completed the underwriting of kimchi bonds (foreign currency-denominated bonds issued domestically) for the largest Indonesian pulp and paper group. These three securities firms have been steadily achieving results in the Indonesian investment banking (IB) business by underwriting kimchi bond issuances and initial public offerings (IPOs) for leading local companies.

According to the investment banking (IB) industry on the 11th, Korea Investment & Securities, Shinhan Investment Corp., and KB Securities recently acquired $80 million (approximately 100 billion KRW) worth of kimchi bonds issued by PT OKI Pulp & Paper Mills (OKI). Each securities firm raised investment funds by issuing asset-backed securities based on the kimchi bonds acquired through special purpose companies (SPCs). OKI is known to plan to use the funds raised through the kimchi bond issuance to repay existing borrowings and for operating capital.

OKI is an Indonesian company with the world's largest pulp production capacity. It is a key affiliate of Asia Pulp & Paper Group (APP Group), the world's largest integrated paper group. APP Group is the intermediate holding company of Sinar Mas Group, the second-largest conglomerate in Indonesia, and owns large-scale production facilities not only in Indonesia but also in major countries such as the United States and China.

Domestic securities firms have expanded their local IB business by establishing subsidiaries in Indonesia. Shinhan Financial Investment succeeded in issuing kimchi bonds for an Indonesian company for the first time domestically in 2018. Since then, it has handled underwriting and acquisition of public and private bonds for several local listed companies multiple times.

Korea Investment & Securities' local subsidiary (KIS Indonesia) has underwritten multiple kimchi bond issuances and also acted as an IPO underwriter. It served as the lead underwriter for the IPO of PT Cilacap Samudera Fishing Industry, one of the leading companies in Indonesia's fisheries sector, successfully completing the listing. It also participated as an underwriter for public bonds issued by the state-owned construction company ADHI (PT Adhi Karya).

In addition to underwriting this kimchi bond issuance, KB Securities also underwrote the private bond issuance of PT Indah Kiat Pulp & Paper Tbk (IKPP), another affiliate of the APP Group. IKPP is a subsidiary of PT Purinusa Eka Persada, the holding company of the APP Group.

An IB industry official stated, "Since major domestic securities firms established subsidiaries in Southeast Asian countries such as Vietnam and Indonesia, they have steadily expanded their local corporate networks," adding, "In connection with local subsidiaries of commercial banks, we expect expansion and results in IB business not only in bond issuance but also in IPOs, acquisition financing, mining investments, and new city development projects."