The Export-Import Bank of Korea (Korea Eximbank) announced that it has successfully issued global bonds totaling US$2.25 billion to investors worldwide on the dawn of January 5. The offering is the largest single Korean global bond offering* to date (government-issued bonds excluded).

*Global bond offering by Korean institutes usually range from US$ 500 million to 1 billion

The dual-tranche* global bond consisted of US$1.25 billion 5-years and US$1 billion 10.25-years with spreads of 3.15% and 3.05%, respectively above US treasuries.

*Dual tranche bonds issues two bonds of different maturities, making it easier to procure large funds
*Citigroup (Moody’s rating A3) issued a US$2.5 billion 5-year bond at 360bp above US treasuries on January 4

The bond issuance is significant as it is the first foreign currency loan raised since the death of the North Korean Leader, Kim Jong-Il. The successful issuance reaffirms foreign interest in Korean-issued bonds and dispels anxiety pertaining to geopolitical risks. It also sets a guideline for other Korean institutions in determining interest rates for future foreign currency borrowings.

“Under increased market uncertainty, there is a need to maximize the amount procured through the offering,” stated a representative of Korea Eximbank. “Our bank’s strategic offering of 5-years and 10.25 years optimizes the amount procured and the pricing of interest rates.”

Dual tranche bond offerings are possible only by institutions of reputable status or national governments. As the biggest seller of overseas bonds and well-recognized by foreign investors, Korea Eximbank was able to issue the US$2.25 billion bond offering without an investor briefing session. The offering cleared within a day.

Dual tranche global bonds have not been issued since April 2009 when the Korean government issued US$3 billion in Foreign Exchange Stability Fund Bonds.

280 and 200 institutions participated in Korea Eximbank’s 5-year and 10.25-year bond offerings, respectively. Regionally, the US accounts bought 42%, Asian 42%, and European 16%. By investor type, fund managers 53%, pension funds and insurance 17%, commercial banks 16%, and central banks 5%.

Proceeds from the bond offering will be used to finance overseas project participation by Korean businesses in strategic industries such as green industries and natural resource development.