Korean gov’t gauges appetite for new USD sovereign debt with ceiling at $1.5 bn

2019.06.12 14:16:59 | 2019.06.12 14:17:57

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The South Korean government has begun gauging appetite for new dollar-denominated sovereign bonds on Wednesday, including its first debt offering for green and sustainability design.

The Ministry of Economy and Finance said on Wednesday that it will issue 5-year green or sustainability bonds and 10-year in straight bonds in U.S. dollar denomination. The exact scope of offering and yields will hinge on book-building sessions, it added.

This year’s ceiling on overseas issue in sovereign debt for foreign exchange stabilization is at $1.5 billion.

Citigroup, Credit Agricole CIB, Hong Kong and Shanghai Banking Corporation (HSBC), and J.P. Morgan are joint underwriters.

The government in September last year drew $1 billion in dollar-denominated notes in 10 and 30 year maturity at sharply lower-than-expected rates due to record-high demand of 5.7 times against offering.

It would be packaging its first green and sustainability bonds in which proceeds are used to fund environmentally-friendly and socially sustainable projects in the new offering.

The government took into consideration of how there has been increasing issuance of green bonds globally as well as demand.

“There is a growing trend globally in issuing green and sustainable bonds,” said an unnamed official from the finance ministry. “Given that there are investors interested particularly in these [green] bonds, [we] expect to be able to expand investor base and partly lower bond yield.”

The official also noted how the move is in line with Korea Investment Corporation (KIC) – the ministry’s entrusted company – has been expanding investment in environmental, social, and governance criteria. The move will also set a benchmark for financial institutions that have been eager to issue sustainable bonds recently.

By Sohn Il-seon and Lee Eun-joo

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