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Korea Exim News

Korea Eximbank Issues Asia’s Largest-ever Samurai Bond

Date 2018.06.21 View 13102

The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman EUN, Sung-soo; “Korea Eximbank" or “the Bank”) announced on June 21 the successful placement of a JPY 120 billion Samurai Bond to institutional investors, the largest amount ever to be issued by an Asian institution.

 

A Korea Eximbank official remarked, “The Bank has timely spotted the demand of Japanese bond investors seeking risk-averse investment options, due to the increased market volatility from capital outflows in emerging markets and rising political instability in Southern Europe. Against such a backdrop, the Bank decided to increase the scale of the issue from 80 billion yen to 120 billion yen, supported by high investor demands despite the low interest rates that the Bank offered.”

 

Through the issuance, Korean papers reaffirmed their status as a ‘safe haven’ for international investors as the offering attracted orders not only from Japanese investors but also from non-Japanese investors as well, including central banks of Asian countries and sovereign wealth funds. In addition, the Bank’s successful launch of the bond in such a sizable amount, equivalent to USD 1.1 billion, only through the Japanese market supports the continuous process of diversification of foreign currency debt market access by Korean institutions.

 

Despite the increased volatility in financial markets due to continuous hikes of U.S. interest rates and an escalating trade dispute between the U.S. and China, the transaction was well-backed by the positive investment momentum forged by the lessened geopolitical risk of the Korean Peninsula.

 

An official from Korea Eximbank stated, “The Inter-Korean Summit and North Korea-US Summit created a peaceful mood and eased the prolonged ‘Korea Discount’ for investors.” He added, “The South Korea-China-Japan Trilateral Summit held in Tokyo in May must have had a positive impact on Japanese investors’ decision to place orders with the Bank.”

 

The bond was structured in dual-tranche, consisting of JPY 70 billion in 1.5-year maturity bonds (annual coupon rate of 0.16%) and JPY 50 billion in 3-year notes (annual coupon rate of 0.27%), which carry the lowest rates that a Korean institution has ever offered for Samurai Bond.

 

Meanwhile, the Bank has made efforts to preemptively secure funding since the beginning of the year to prepare against increased volatility in the global financial market. As a result, the Bank has raised about USD 5.8 billion (including the Samurai Bond issue), which represents 73% of its funding target of USD 8 billion for the year.

 

The proceeds of the bond issue will be used to support the overseas expansion of domestic businesses into the Japanese markets, including their large-scale investments in the semiconductor sector in the nation.