S. Korea readying global bond offering likely up to $1.5 bn ceiling in Sept

[Graphics by Song Ji-yoon]

The South Korean government is readying global bond sale up to this year’s budgeted ceiling of $1.5 billion possibly in September before market terms turn unfavorably.

According to multiple sources from the finance industry on Sunday, the Ministry of Economy and Finance has been recruiting underwriting syndicate banks to ready for this year’s sovereign offering.

“The conditions are all favorable after all three rating majors have finished reaffirming the country’s sovereign credit rating,“ said an official of the ministry of finance.

State utility firm Korea Gas Corp. earlier this month raised $800 million in global bonds at the cheapest rate for a Korean public issuer, setting the stage favorably for arrival of a sovereign bond from Korea. Another state firm Korea Housing Finance Corporation last month issued 1 billion euro worth five-year bonds in negative coupon.

Fitch Ratings recently reaffirmed Korea’s credit rating at AA- with a “stable” outlook. Standard & Poor’s and Moody’s kept Korea’s rating at their respective third highest scale in April and May.

Rating agencies joined most international institutions who have revised up their growth outlook for Asia’s fourth largest economy due to record-breaking exports in the first half.

The credit default swap (CDS) premium on Korean dollar-denominated bonds has slipped to 18 basis points, the lowest since 2008 financial crisis.

CDS premium is a protection against default risk. A lower premium shows lower credit risk

Korea last year priced $1.45 billion which included its first euro-denominated bond at cheapest rate. The $625 million 10-year bond denominated in the U.S. dollar was priced 50 basis points over the corresponding U.S. treasuries.

It could consider another euro offering while rates remain in the negative territory and feature green-themed issue in line with the country’s carbon neutrality goal.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]