Housing Finance Corporation Issues 'COVID-19 Social Bond', First Non-European Issuer

Issuance of Euro-Denominated Social Covered Bonds for COVID-19 Response ‥ Consecutive Zero Interest Rates Following January

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] Korea Housing Finance Corporation (HF) announced on the 30th that it has issued a 500 million euro COVID-19 response social bond, a "covered bond," at a zero interest rate level to support low-income households facing economic difficulties due to the prolonged COVID-19 pandemic.

A covered bond is a bond issued by financial institutions secured by high-quality assets such as mortgage loans. Investors have the right to claim repayment from the issuer and also have priority rights over third parties to be repaid from the cover pool of underlying assets provided as collateral by the issuer.

The maturity of this covered bond is 5 years, and the issuance interest rate was set at 0.003%, which is the 5-year euro mid-swap rate (-0.347%) plus a 0.35% spread. This marks the second consecutive issuance at a zero interest rate level following January of this year.

It was issued as a COVID-19 response social bond (social bond) type covered bond for the first time among non-European countries. HF plans to use the raised funds for policy mortgage supply to support low-income households and actual demanders who face difficulties in financing due to COVID-19 in purchasing their own homes.

As the global spread of COVID-19 prolonged, making it difficult to visit Europe and meet investors directly, HF successfully expanded its investor base in countries such as Italy and the United Arab Emirates by utilizing non-face-to-face roadshows such as conference calls. A total of 42 investors participated in this issuance, including central banks and international organizations from various European countries (29%), large asset management companies (40%), and pension funds and banks (31%).

Lee Jung-hwan, President of HF, said, "Despite the expansion of financial market uncertainties such as concerns over the second wave of COVID-19, we succeeded in issuing at a zero interest rate level for the second consecutive time, recognizing the stability of HF's covered bonds and the rarity of COVID-19 response social bonds," adding, "We hope this will help many low-income households in purchasing their own homes."

He added, "Korea Housing Finance Corporation will strive to diversify low-interest policy mortgage funding sources by expanding issuance scale as a leading covered bond issuer in Asia."

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