Major Window for FX Funds

Exim Bank to secure enough FX funds to play the role of safety pin for Korean exporters

The Korea Export and Import (Exim) Bank signed an agreement on Nov. 7 on the issuance of $612 million worth of Uridashi bonds in Japan with Daiwa Securities Co. of Japan, the sole manager of the deal, the bank said recently.
Uridashi bonds are issued by international organizations or financial firms to private investors in Japan in Japanese yen or foreign currencies.
Daiwa Securities will take over the entire amount of the bonds from Korea Exim Bank and sell them to Japanese investors. Exim bank also issued 400 million yen worth of the bonds in Japan in January this year.
The bonds will be sold in four currencies ― the Australian dollar, New Zealand dollar, Brazilian real, and Turkish lira ― with the maturities ranging from three to six years.
The bond denominated in New Zealand dollars in the amount of $245 million will have a three-year maturity at a rate of the three-month Libor plus 183 basis points (bp). The bonds issued in Brazilian real and Turkish lira in the amount of $367 million will be repayable in five to six years at the three-month Libor plus 190 bp interest rate, the bank said.
Exim Bank President Kim Yong-hwan said the issuance of so called, "Watanabe bonds," the nickname of the Uridashi bond in Japan, is a win-win venture for both the issuer and Japanese investors who want higher earnings on their investments, as current bank deposit interest rates in Japan are so low.
Kim, who moved from the Financial Services Commission to take over the helm of Exim Bank in February, changed the reporting procedure as his first order of business. He told the key executives to use phones in making decisions, as carrying documents from office to office wastes too much time since almost all decisions have to be made quickly because many of them involve the issuance of bonds overseas that need prompt decisions on things like interest rates, maturities, and schedules.
The CEO said the top manager should make his decisions after serious thought, no matter how small the issue looks, but do it in a speedy fashion, as they affect customer firms and the national economy. They have to harmonize those factors when they make decisions, although it can be very hard at times, he said.
Speed is as important as communication, Kim stressed. He said that CEO mail, intranet SNS, and other diverse means are used as communication channels to communicate with officers and staff at the bank on certain issues and to tell them his management philosophy.
Right now, the bank has been busy working on measures to secure enough foreign exchange to play the role of the safety pin for Korean exporters. The bank has recently expanded its foreign exchange borrowing target for this year from $8.8 billion to $10 billion.
The idea is to make the Exim Bank a major window for the supply of foreign exchange by preemptively securing foreign exchange liquidity. The foreign exchange will include not only U.S. dollars, but also other currencies including the Japanese yen and currencies of Middle East countries.
The bank will also expand its support to SMEs by including their products in the list of export products eligible to receive overall export financing by the bank. The overall export financing system is the financing method for funding the production of goods slated for exports based on the companies' export records. The bank plans to release 2 trillion won in the fourth quarter alone, in addition to 250 billion won in funds for the development of technologies and overseas market exploration. nw

Chairman Kim Yong-hwan, left, of the Korea Export and Import Bank shakes hands with his counterpart at Daiwa Securities Co. of Japan after signing an agreement naming the Japanese securities co. the sole manager for the issuance of $612 million worth of "Uridashi bonds" in Japan on Nov. 7 by the Korean bank.
Photo on courtesy of Exim Bank