The world's largest investment bank Goldman Sachs is expected to raise funds in South Korea in earnest. It is planning to issue won-denominated bonds in the domestic market in order to finance its investment all around the world.
According to investment banking (IB) industry sources on June 18, Goldman Sachs International issued private Arirang bonds worth 105 billion won (US$95.07 million) on June 12. An Arirang bond is a won-denominated bond issued by a foreign entity in the South Korean capital market. The company issued 100 billion won (US$90.54 million) worth of Arirang bonds with a maturity of 15 years and 5 billion won (US$4.53 million) worth of bonds with a maturity of 10 years. The 15-year bonds carries a coupon rate of 4.8 percent, while that of the 10-year bonds is 4.1 percent. The application for call options will start from June 12, 2019. Goldman Sachs issued Arirang bonds worth 20 billion won (US$18.11 million) in May last year for the first time and then 10 billion won (US$9.05 million) in April this year again. Goldman Sachs is planning to expand the issuance of bonds in the domestic market in the future.
The company has decided to raise funds in South Korea due to the growth of the nation’s capital market and the financial resources of institutional investors. In particular, it lures domestic institutional investors with an attractive coupon rate of 4.8 percent annually.
Funds to be raised by issuance of Arirang bonds will be used for various purposes, such as securities, bonds and private equity investment in the global market, not in South Korea. Market experts said this is also due to the fact that the Korean won is getting stronger against the dollar after tension has eased in the Korean peninsula.
Considering the interest rate of the won-dollar foreign exchange swap, a foreign entity can exchange the won-denominated bonds for dollars at a relatively lower interest rate than in advanced countries. This is why foreign IBs are seeking to increase bond issuances in the domestic market.
Nomura International Funding, a subsidiary of Nomura Group in Singapore, issued 180 billion won (US$162.97 million) worth of Arirang bonds alone last year. An official from the market said, “Nomura also expanded the issuance of Arirang bonds in the domestic market last year. There is a clear indication of global IBs expanding the issuance of bonds in South Korea.”