Saneun Issues $500 Million Eurobond... KEXIM Also to Launch Foreign Currency Bonds (Comprehensive)

Mountains Followed by Mercury Also Issuing Foreign Currency Bonds... Proactive Foreign Currency Liquidity Secured

[Asia Economy Reporter Kangwook Cho] Korea Development Bank (KDB) has successfully issued $500 million (approximately 600 billion KRW) in dollar-denominated bonds. This marks the first issuance of dollar bonds by a domestic financial institution since the COVID-19 pandemic began in earnest. It is understood that the Export-Import Bank of Korea will also soon issue foreign currency bonds. Despite the increasing uncertainty in the global financial markets, the proactive efforts of policy banks to secure foreign currency liquidity are expected to reduce the burden on domestic companies in raising overseas funds in the future.

According to financial sources on the 8th, KDB issued a total of $500 million in Eurobonds targeting investors in Asia and Europe the previous day. This dollar bond is structured as a 3-year maturity floating rate note (FRN), with the initial guideline spread offered to local investors at 1.80%. The original target amount was $300 million. However, with strong participation not only from Singapore and Hong Kong but also from European and Middle Eastern institutions, total orders reached $2.31 billion, with 96 investors participating. As a result, KDB increased the issuance size by $200 million from the original target to $500 million and succeeded in lowering the spread from 1.80% to 1.45%, a 0.35 percentage point reduction.

A KDB official explained, "We attracted orders approximately 4.6 times the issuance amount, increasing the issuance by $200 million from the initial target of $300 million. Based on solid investor demand, the issuance yield was also set at a level 0.35 percentage points lower than the initially proposed guideline of 1.80%."

Domestically, the issuance of dollar-denominated public bonds by financial institutions had been halted since KDB’s $1.5 billion global bond issuance on February 10, when the COVID-19 crisis intensified. As a policy bank with a strong credit rating (AA) and market position, KDB plays a benchmark role in the overseas bond market. In particular, KDB’s successful dollar bond issuance has raised expectations that other financial institutions and companies may also succeed in issuing dollar bonds.

KDB expects that this issuance will help create a favorable environment for domestic institutions to re-enter the overseas public bond market in the future.

A KDB official said, "In a situation where the global bond issuance market has contracted due to the COVID-19 crisis, we first identified short-term and FRN (floating rate note) investment demand and proceeded with the issuance. Through this issuance, we have provided guidelines for Korean institutions to re-enter the foreign capital market."

Another policy bank, the Export-Import Bank of Korea, is also preparing to issue foreign currency bonds soon. Although the specific schedule and issuance size have not been finalized, it has been confirmed that they are monitoring market trends through underwriters to find better conditions.

An official from the Export-Import Bank said, "We are currently carefully examining market conditions to find favorable issuance terms. As a policy bank, we must provide guidance or benchmarks for other financial institutions and companies, so we have no choice but to approach this cautiously."

With KDB’s successful dollar bond issuance, it is argued that foreign currency bond issuance by the Export-Import Bank as well as domestic commercial banks and companies could accelerate. The success of a policy bank in raising foreign currency funds is significant as it confirms solid investor demand for Korean bonds in overseas financial markets.

A financial industry official said, "With the success of policy banks’ foreign currency bond issuance, other financial institutions and companies will be able to re-enter the overseas bond market. Securing foreign currency liquidity through this will also ease support for domestic companies by domestic financial institutions in the future."

This content was produced with the assistance of AI translation services.