Korea’s leading commercial lender KB Kookmin Bank issued 500 billion won($420 million) in won-denominated covered bonds, the first offering in the security-backed debt type in Korea.
In a dual-tranche structure, 400 billion won bonds were offered in five-year maturity at a coupon rate of 1.90 percent and 100 billion won in seven-year date at 1.96 percent. They were 13.3 basis points and 11.4 basis points, respectively, above corresponding Korean government bonds.
The transaction was managed by KB Securities Co. and Korea Housing Finance Corp. took part as an observer on assets.
Covered bonds are debt securities issued by a bank or mortgage institution and backed by specific assets, enabling surer interest payments as well as principal in case the issuer goes insolvent. The bank plans to use the proceeds on funding long-term, fixed-rate loans.
It said the transaction had strong demand from various institutional investors including banks and pension funds.
Earlier in January, KB Kookmin Bank issued 10-year dollar-denominated sustainability subordinated bonds worth $450 million at a coupon of 4.5 percent, 187.5 basis points above the corresponding U.S. Treasury. The debts are listed on Singapore Exchange. It was the first Korean bank to issue foreign currency-denominated sustainability subordinated bonds.
By Lee Seung-hoon and Cho Jeehyun
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