The Export-Import Bank of Korea announced on May 17 that it has successfully issued a JYP 100 billion Samurai Bond*, the largest issuance by an Asian institution.
* Samurai Bond: yen-denominated bonds issued by foreign institutions in Japanese capital markets.
Maturities were varied to suit investor needs. 2, 3, and 5 year tenors were issued in amounts of JYP 51.4 billion, 41.2 billion, and 7.4 billion, respectively.
Bond interest rates for all maturities had less than a 1% premium over the JPY Libor.
The interest rate is the lowest among Samurai Bonds issued by a Korean institution since last October when the Japanese market tightened due to the Eurozone financial crisis.
Successful large-scale issuance of Samurai Bonds at low interest rates for two consecutive years by Korea Eximbank is expected to stimulate issuance of Samurai Bonds by other Korean institutions.
Amid growing uncertainties in financial markets such as the potential exit by Greece from the Eurozone and re-emergence of a European sovereign debt crisis, this recent issuance by the Bank of almost USD 1.3 billion in the Japanese bond market after having issued a USD 2.25 billion global bond earlier this year, bears great significance.
A representative of the Bank commented, “Korea Eximbank determined that there was a shortage of supply in the Japanese bond market based on discontinued bond issuance by Japanese power companies following last year’s earthquake in Japan as well as decreased issuance by Europe following the Eurozone crisis. With that assessment, the Bank closely monitored Japanese markets and initiated IR seminars in Japan last month. As the Bank issued bonds at a time when bond availability was insufficient to meet investor demand, the Bank was able to increase its issuance volume from the initial JPY 50 billion to JPY 100 billion, despite the low interest rate.”
Since the beginning of the year, Korea Eximbank has made efforts to enter the Japanese capital market including the formation of a regular consultative group with three Japanese megabanks (SMBC, BTMU, Mizuho) and strengthened networks with JBIC.
As evidenced by the successful issuance of USD 2.2 billion in Samurai and Uridashi bonds* this year, the Bank is strengthening its foreign currency base in Japan’s market.
* Uridashi Bond: bond issued in various currencies and sold in small amounts to individual investors in Japan.
The Bank has made efforts to secure funding since the beginning of the year to prepare against growing volatility in the global financial market.
As a result, the Bank has raised about USD 6.5 billion (total includes recent Samurai Bond issuance) or 60% of its funding target of USD 11 billion for the year.
The Bank will continue IR activities to expand into competitive funding markets beyond US dollar markets such as the Hong Kong dollar (Dimsum Bond), Swiss franc, Thai baht, Australian dollar, etc.
Thomson Reuters DealWatch*, a leading authority of the Japanese financial sector, announced on March 2 that it selected the Export-Import Bank of Korea for the Samurai Bond of the Year 2011 award in recognition of the Bank’s successful bond issuance in June.
Thomson Reuters highly evaluated the Bank’s JPY 80 billion issuance of the Samurai Bond in 2011, the largest issuance of the bond by a Korean institution, despite decreased demand for Samurai Bonds following Japan’s devastating earthquake in 2011.
* Thomson Reuters is a Japanese financial market analysis service in Japan (affiliated with IFR). Established in 1995, the DealWatch Award is the only award recognizing the Samurai Bond market.
