Halo Effect of Inter-Korean Summit
The Export-Import Bank of Korea announced on May 24 that the state-run bank has successfully issued a total of US$1.5 billion in global bonds for investors worldwide.
The global bonds are this year’s first US dollar-denominated global bonds issued by the Export-Import Bank of Korea and the largest foreign exchange bonds issued by Korean institutions this year. The global bonds issued on the day has a dual tranche structure that issues two bonds with different maturity or interest rate terms (fixed/variable) at the same time and is comprised of US$800 million with three-year maturity and a variable interest rate and US$700 million with five-year maturity and a variable interest rate.
The interest rates were set by adding 0.575% to the three-month LIBOR rate in the case of bonds with three-year maturity and 0.775% to the three-month LIBOR rate in the case of bonds with five-year maturity.
A total of 168 investors showed a big interest in the issuance of the global bonds, placing a US$2.6 billion order for them. Asian investors accounted for 49% while European and Middle Eastern and US investors for 36% and 15%, respectively. In particular, as the Export-Import Bank of Korea set a new benchmark by succeeding in issuing them as dual tranche global bonds with variable interest rate terms for the first time as Korea-issued global bonds so it is expected that Korean institutions that want to pare down borrowing cost will evince an avid interest in the issuance of bonds with a variable interest rate in the future.
"Despite financial instability in newly emerging countries, Korea's credit default swap (CDS) trended downward and stabilized, creating a favorable environment," said an official of the Export-Import Bank of Korea. “In particular, the bank benefited from the halo effect of the historic April 27 inter-Korean summit in issuing the global bonds."