Hyundai Capital Issues Floating-Rate Bond Based on Korea Overnight Financing Rate (KOFR)
50 Billion KRW Issuance
Contributing to the Growth of the Risk-Free Reference Rate Market
On August 12, Hyundai Capital announced that it has issued a floating-rate bond based on the Korea Overnight Financing Rate (KOFR), marking the first time a non-bank financial institution in Korea has done so.
The total issuance amounts to 50 billion KRW, with a maturity of one year. The coupon rate is set at KOFR plus 27 basis points (1bp = 0.01 percentage points).
The risk-free reference rate is a benchmark interest rate calculated based on ultra-short-term rates?such as call rates and repurchase agreement (RP) rates?that are sufficiently liquid and based on actual transactions, making rate collusion difficult.
In Korea, KOFR has been selected and calculated as the risk-free reference rate since 2021.
The government and the Bank of Korea are encouraging the use of KOFR as the benchmark rate for floating-rate bond issuances, instead of the CD (certificate of deposit) rate previously used.
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Lee Youngseok, Chief Financial Officer (CFO) of Hyundai Capital, stated, "We pursued this issuance with the belief that we must contribute to the global standardization of the capital market," adding, "We plan to continue expanding KOFR-based floating-rate bond issuances going forward."
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