Korea Eximbank (www.koreaexim.go.kr, Chairman Kim Yong-hwan, “Korea Eximbank”) signed a bank loan agreement with Japan’s Mizuho Bank Ltd. on August 21, securing a USD 500 million loan with a five-year maturity.

* Bank Loan: a method of funding for financial institutions using bank-to-bank lending.

Chairman Kim of Korea Eximbank met with President and Chief Executive Officer Yasuhiro Sato of Mizuho Financial Group Inc. and signed the agreement.

Despite the high volatility in international financial markets triggered by the US Federal Reserve Board’s announcement of QE tapering, the loan was made at a highly favorable interest rate and maturity.

A Korea Eximbank official explained, “Due to unfavorable market conditions since Fed Chairman Ben Bernanke hinted at the possibility of winding down asset purchases in June, investors have demanded prohibitively high yields on new bond issues, and so it has been difficult to issue new bonds in international markets. Nevertheless, the strong relationship we have built with Mizuho enabled us to secure an exceptionally large and long-term bank loan at an interest rate at least 10bp lower than what we would have to pay to bond investors.”

Korea Eximbank and Mizuho have maintained close cooperation since 2007 when they first co-financed an overseas project.

This year alone, the two banks co-financed the U.S. Sabine Pass LNG Terminal project, the Vietnam Nghi Son Refinery project, and the Saudi Arabia Sadara Chemical Petrochemical project with a combined loan amount of USD 2.76 billion (USD 2.25 billion by Korea Eximbank and USD 510 million by Mizuho Bank).

Korea Eximbank has been continuously expanding its presence in the Japanese capital market as part of its effort to diversify its funding sources.

Under Chairman Kim’s watch, a ‘Regular Consultative Body with Japanese Financial Institutions’ was established and quarterly meetings held to enhance cooperation with Japanese banks.

Moreover, since 2011, Korea Eximbank has been raising USD 3 billion a year in the Japanese capital market by issuing various types of bonds including Samurai Bonds and Uridashi Bonds.

The bank is planning to issue its next Uridashi Bond through Mizuho Securities in August to raise USD 140 million from Japanese private investors.

At the signing ceremony, Chairman Kim expressed his willingness to cooperate more extensively with Japanese financial institutions in project financing deals in emerging markets including the Middle East, Asia and Latin America.

In the face of heightened financial market volatility and to reduce funding costs, Korea Eximbank has been striving to diversify its funding sources by adding instruments such as bank loans and private placements to its borrowing portfolio. This year, the bank has raised USD 4.8 billion from bank loans and private placements out of a total funding amount of USD 7.64 billion.