LH Expands Funding Channels with First 500 Million Euro Bond Issuance Since Merger

Korea Land and Housing Corporation (LH) has issued a euro-denominated public bond for the first time since its merger in 2009. While LH has consistently raised around 10 trillion won in bonds annually through both domestic and overseas markets, this marks the first time it has entered the euro market with a public offering.

On the 19th, LH announced that it had issued a euro-denominated bond worth 500 million euros (approximately 849.3 billion won). The bond has a three-year maturity, and the interest rate was set at the three-year euro mid-swap rate plus 37 basis points (1bp = 0.01 percentage points). The transaction was jointly managed by BNP Paribas, Credit Agricole, Deutsche Bank, HSBC, and Korea Development Bank. LH previously issued a 500 million dollar (approximately 693.6 billion won) public bond in May, making this its second overseas public bond issuance this year.

LH cited cost reduction as the key reason for issuing the euro-denominated bond. While overseas public bonds from state-owned enterprises are typically denominated in US dollars, LH determined that euro-denominated bonds were more favorable given the current interest rate environment.

When LH decided to issue the bond about two months ago, it anticipated an interest rate gap of 5 to 10 basis points for a three-year maturity and began preparations accordingly. Despite some fluctuations in market conditions, the euro-denominated bond was ultimately issued at an interest rate 3 to 5 basis points lower than a comparable dollar-denominated public bond, resulting in tangible savings on interest expenses.

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Since there had been no euro-denominated public bond issuances by Korean non-policy financial institutions since 2013, LH made significant efforts to attract high-quality investors. In October, it held in-person investor presentations in Frankfurt, Amsterdam, and London, and this month, it also conducted online presentations for investors in Asia and Europe.

As a result of these efforts, LH received orders totaling 2.2 times the offering amount from 41 global institutional investors. By investor type, central banks and government agencies accounted for the largest share at 34%, followed by asset management companies and funds (23%), and banks (19%).

The entire proceeds from this issuance will be used for the construction of public rental housing and related projects. Oh Donggeun, Head of Finance at LH, stated, "To ensure a stable foundation for advancing policy projects, we will continue to attract high-quality new overseas bond investors and diversify our funding sources."

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