The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Kim Yong-hwan, “Korea Eximbank”) announced on January 21 that the Bank successfully issued a USD 300 Milllion Kimchi Bond*.

* Kimchi Bond is a foreign currency-denominated bond issued by domestic or foreign companies in Korea.

It was the first Kimchi Bond issued since the Korean government unveiled its ‘2014 Economic Policy Initiative*’ directing state-owned companies to make greater use of the abundant foreign currency liquidity in the country.

The issue was made in a dual-tranche* structure, consisting of USD 220 million in 10-year maturity bonds and USD 80 million in 3.5-year maturity bonds. Pricing on the 10-year and 3.5-year tranches has been set at 3.95% and US dollar Libor +0.63%, respectively.

* Dual Tranche: issuing bonds in two different maturities

The successful Kimchi Bond issue by Korea’s largest foreign currency bond issuer was welcomed by the market as having satiated the hunger of insurers, banks, and securities companies alike for high-quality Korean paper.

Whereas most Kimchi Bonds to date had short-term maturities of three years or less, Korea Eximbank placed its bet on ten-year notes, accurately gauging the appetite of domestic investors for long-term bonds.

By hitting the Global Bond and Kimchi Bond markets for the first time among Korean issuers this year, Korea Eximbank has yet again set benchmarks for other foreign currency debt issuers in the country to follow.

The competitive pricing achieved by Korea Eximbank is also expected to encourage Kimchi Bond issuances by other government-owned financial institutions and corporations.

A Korea Eximbank official remarked, “We were able to confirm the existence of robust investor demand for bonds issued by high credit-quality domestic institutions. We will keep monitoring market conditions to seize the ideal timing for future Kimchi Bond offerings.”