Korea Eximbank sells $3.5 bn worth foreign currency bonds at cheaper rates

Korea Eximbank building [Source : Export-Import Bank of Korea]

Export-Import Bank of Korea (Korea Eximbank) successfully sold a record $3.5 billion worth of foreign currency-denominated bonds with coupon rates lower than its initial offers, hinting at eased concerns of the country’s credit crunch triggered by the Legoland theme park developer’s debt default in September.

Korea Eximbank issued $1 billion worth of three-year bonds, $1.5 billion in five-year and $1 billion in 10-year, the bank said Thursday. The coupon rates are 0.85 percentage points, 1.20 percentage points, and 1.45 percentage points, respectively, above the rate of corresponding U.S. Treasury bills.

The total order for $3.5 billion offering reached $17 billion, the highest ever for its foreign bond offerings. Orders came mostly from large banks and asset management firms from Asia, Europe, and the United States, according to the bank. Investors from Asia accounted for 37 percent, those from Europe and the Middle East 32 percent, and the U.S. 31 percent. By institution type, pension operators, insurance firms, and asset managers made up 46 percent, banks 29 percent, and international institutions and central banks 25 percent.

Korea Eximbank’s latest foreign currency bond issue is the largest of its kinds sold outside the country, excluding the Korean government bonds, according to the bank. The coupon rates were also issued 0.35 percentage point lower than its initially offered rates, thanks to explosive demand. The bid-to-cover ratio was 4.9 times, much higher than the U.S. market average of 2.6 times.

The 10-year bonds are sold as blue bonds. The bank will use funds from blue bond sales to finance marine and ocean-based projects to reduce any adverse climate and environmental impacts. As Korea’s first blue bond issued by Korean institutions, Korea Eximbank plans to use the proceeds on supporting Korean firms to build eco-friendly ships.

Korea Eximbank attracted huge bids, beating many other offerings by Hong Kong government and an Australian bank, on the same day, noted Kim Yoon-kyung, capital marketing team manager at Korea Center for International Finance.

Analysts are attributing the bank’s successful bond sale to eased concerns about Korea’s credit crunch and growing optimism that the run of interest rate hikes is finally near an end.

Market expectations are high that the global bond rates are approaching the peak, and investors’ interest in high-yield bonds of top investment grade bonds has revived somewhat, said Oh Chang-seop, senior analyst at Hyundai Motor Securities Co.

While many showed excitement over the bank’s success, some warned that it may be too early to take bright views of the market as the Korea Eximbank could have succeeded in the latest bond sale as it has strong credit standing in an absence of major negative issues.