Bonds Carry Negative Coupon Rate
Korea Hydro & Nuclear Power Co. (KHNP) has issued Swiss franc bonds with the lowest-ever interest rate issued by South Korean companies in Switzerland.
The company announced on June 26 that it issued 300 million Swiss franc (US$306.75 or 354 billion won) worth of five-year bonds with an interest rate of minus 0.115 percent on June 20. It is lower than the previous record of minus 0.02 percent.
The figure is 0.34 percentage point lower than the distribution rate of five-year bonds issued by the KHNP in the domestic market and it is also the lowest interest rate of bonds issued by the firm at home and abroad since its founding. An official from the KHNP said, “The company has been issuing overseas bonds almost every year since 2009 but it is the first Swiss franc bond. We have analyzed the Swiss financial market thoroughly and achieved the lowest interest rate of bonds issued by South Korean companies.”
With the latest issuance of bonds, the KHNP will have the interest cost reduction effect worth 5.90 billion won (US$5.10 million) compared to five-year domestic bonds. However, some say that the firm was able to issue the bonds with a negative interest rate because the benchmark rate in Switzerland has been remained at minus 0.75 percent since 2015. In fact, Korea Railroad Corp. also succeeded in issuing 150 million Swiss francs (US$153 million or 177.22 billion won) worth of bonds with the interest rate of 0 percent last month. In addition, Korea Gas Corp. issued Swiss franc bonds in March by lowering the reimbursement amount which is practically a negative interest rate.