The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Kim Yong-hwan, “ Korea Eximbank”) announced that it has successfully issued global bonds worth USD 1 billion to investors worldwide in the early morning of September 13.

The issue was made in a dual-tranche* structure, consisting of USD 500 million in 3-year maturity bonds and USD 500 million in 5-year maturity bonds. Pricing on the 3-year and 5-year tranches has been set at US dollar Libor + 0.85% and US Treasury yields + 1.275%, respectively.
* Dual Tranche: issuing bonds in two different maturities

The 5-year tranche, in particular, was priced to yield less than 3% despite the surge in US Treasury rates since Chairman Bernanke of the US Federal Reserve hinted at the possibility of tapering the Fed’s quantitative easing program.

The dual- or multi-tranche structure, recently elevated into a market trend by such issuers as US telecom operator Verizon, the Russian Government, and Japan’s Sumimoto Bank, is considered the preserve of highly-recognized institutions such as Korea Eximbank.

A Korea Eximbank official explained, “We decided to place our bets on 3-year and 5-year maturities, taking into account borrowing costs and the preference of investors for short- and medium-term bonds at a time when the Fed’s QE tapering looms large on the horizon. In the end, our dual-tranche offering was able to satisfy the diversified appetites of investors at a very competitive pricing.”

Market conditions were improving in the lead-up to the bond issue, with momentum still alive from the largest single debt issue in history by Verizon (USD 49 billion) and geopolitical risk also reduced due to the postponement of a threatened strike on Syria.

Korea Eximbank decided to launch the deal on September 13 to pre-empt potential market jitters that may result from the US Federal Reserve’s Federal Open Market Committe (FOMC) meeting scheduled for September 17 and 18.

The bond was oversubscribed by five times, attracting over 200 investors.

By region, 46% of the deal went to US investors, 40% to Asia, and 14% to Europe.

The deal was also notable for the participation of many conservative investors known for investing only in debts rated AA or above, including central banks, government agencies, and international financial institutions.

The recent wave of successful bond issues by the Korean government (10-year), the Korea Development Bank (5.5-year), and Korea Eximbank (5-year, 3-year) is likely to have set benchmarks for Korean companies contemplating their own global bond offerings.

The foreign currency funds obtained through the bond issue will go to supporting the globalization of Korea’s strategic industries including industrial plants, shipbuilding, resource development, and future industries.