KB Kookmin Bank has issued global covered bonds for the third time this year. However, it was the bank’s first private placement of bonds.
According to investment banking (IB) industry sources on Dec. 12, KB Kookmin Bank issued US$100 million (112.9 billion won) worth of private covered bonds overseas on Nov. 20 in order to raise operation funds and repay debts.
Covered bonds are bonds secured on assets, such as mortgage loans and government bonds, issued by financial companies, including banks. Investors can be doubly guaranteed, while banks can cut down issuing costs.
The 3-year covered bonds issued by Kookmin Bank are secured against the cash flow of mortgage loans. The bank fixed the coupon rate at 3.409 percent a year, which was lower than 3.625 percent of the 3-year dollar-denominated bonds issued in October.
It is also promising that there is a steady demand from foreign institutional investors. KB Kookmin Bank’s covered bonds belong to gilts. Foreign institutions are continuously interested in covered bonds, which are gilts, in a bid to manage the liquidity ratio.
Kookmin Bank is rated A1 stable by Moody's and its covered bonds AAA stable which is four grades higher. The bank is also rated A+ stable by Standard & Poor's and its covered bonds AAA stable.
Kookmin Bank is the only covered bond issuer among banks in South Korea. It has issued a total of US$1 billion (1.13 trillion won) of covered bonds in October 2015 and February in 2016 – US$500 million (564.5 billion) each.