Exim Bank's Successful Issuance of Global Bonds

Offering the largest overseas bond ever issued by Korean financial institutions

The Export-Import Bank of Korea (Korea Eximbank) announced that it has successfully issued global bonds totaling $2.25 billion to investors worldwide on the dawn of Jan. 5. The offering is the largest single Korean global bond offering to date (government-issued bonds excluded).
Global bond offering by Korean institutes usually range from $500 million to $1 billion.
The dual-tranche global bond consisted of $1.25 billion 5-years and $1 billion 10.25-years with spreads of 3.15% and 3.05%, respectively above US treasuries. Dual tranche bonds issues two bonds of different maturities, making it easier to procure large funds
Citigroup (Moody's rating A3) issued a $2.5 billion 5-year bond at 360bp above US treasuries on January 4
The bond issuance is significant as it is the first foreign currency loan raised since the death of the North Korean Leader, Kim Jong-Il. The successful issuance reaffirms foreign interest in Korean-issued bonds and dispels anxiety pertaining to geopolitical risks. It also sets a guideline for other Korean institutions in determining interest rates for future foreign currency borrowings.
"Under increased market uncertainty, there is a need to maximize the amount procured through the offering," stated a representative of Korea Eximbank. "Our bank's strategic offering of 5-years and 10.25 years optimizes the amount procured and the pricing of interest rates."
Dual tranche bond offerings are possible only by institutions of reputable status or national governments. As the biggest seller of overseas bonds and well-recognized by foreign investors, Korea Eximbank was able to issue the $2.25 billion bond offering without an investor briefing session. The offering cleared within a day.
Dual-tranche global bonds have not been issued since April 2009 when the Korean government issued $3 billion in Foreign Exchange Stability Fund Bonds.
280 and 200 institutions participated in Korea Eximbank's 5-year and 10.25-year bond offerings, respectively. Regionally, the US accounts bought 42%, Asian 42%, and European 16%. By investor type, fund managers 53%, pension funds and insurance 17%, commercial banks 16%, and central banks 5%.
Proceeds from the bond offering will be used to finance overseas project participation by Korean businesses in strategic industries such as green industries and natural resources development.
Exim Bank President Kim Yong-hwan, who moved from the Financial Services Commission to take over the helm of Exim Bank in February,2011, 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 2011 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. nw

Chairman and President Kim Yong-hwan of the Export-Import Bank of Korea.

A view of the Export-Import Bank of Korea building in Seoul.