Fundraising in Korean Capital Market
Merrill Lynch Netherlands is increasing its financing in South Korea by issuing more Arirang bonds, which are won-denominated bonds foreign companies issue in South Korea.
The company issued a 30-year Arirang bond worth 30 billion won on Feb. 6. The main office of Merrill Lynch stands surety and the coupon rate is 2.3 percent. Merrill Lynch can exercise a call option from Feb. 6, 2021.
Earlier, Merrill Lynch issued a 15-year private placement worth 20 billion won in December last year as its first Arirang bond issuance. At that time, the coupon rate was fixed at 4.2 percent. Merrill Lynch adopted the long maturities at the request of institutional investors such as insurers. “It seems that the company issued the bonds in the interest of stable financing diversification,” said an industry insider.
It has to do with ongoing low interest rates, too. Domestic bond rates are continuing to fall these days. For instance, the three-year treasury bond rate fell from 2.1 percent to 1.8 percent from January 2018 to January 2019 and then to 1.2 percent this month.
More and more foreign companies and financial institutions are showing interest in financing in the South Korean capital market. China Eastern Airlines, the second-largest airline in China, issued an Arirang bond worth 300 billion won in December last year. Goldman Sachs and Nomura Securities already did so, too.