Korea Investment & Securities announced on the 24th its participation as an underwriter in Hyundai Commercial's 400 million yuan (approximately 87.5 billion won) public kimchi bond issuance. KB Securities served as lead underwriter with Korea Investment & Securities as co-underwriter, each taking half of the issuance volume. The bond carries a 2-year maturity and an annual interest rate of 2.20%. A Korea Investment & Securities official stated the issuance allows Hyundai Commercial to diversify its foreign currency funding sources, respond to financial market volatility, and strengthen its stable funding base. Kimchi bonds are foreign currency-denominated bonds issued in Korea's capital market, enabling companies to secure foreign currency liquidity and diversify funding currencies by leveraging the domestic investor base.
Bond Structure and Underwriting Arrangement
KB Securities acted as lead underwriter for the transaction, with Korea Investment & Securities participating as co-underwriter. The two firms split the 400 million yuan issuance volume equally. The bond has a 2-year maturity and pays an annual coupon of 2.20%.
Regulatory Easing and Yuan Kimchi Bond Market Growth
The Bank of Korea eased kimchi bond investment restrictions for foreign exchange business institutions in June last year, the first such relaxation in 14 years. Since then, yuan-denominated kimchi bond issuance has expanded. Recent yuan funding rates have remained lower than won and dollar rates, driving continued issuance demand from credit card companies and capital companies. Hyundai Card became the first domestic credit finance company to issue a public kimchi bond in January, opening the market. KB Kookmin Card and Hyundai Capital subsequently joined the issuance trend.
Korea Investment & Securities Expands Yuan Bond Capabilities
Korea Investment & Securities plans to expand its underwriting and placement capabilities in the yuan kimchi bond market following this transaction. The firm stated it will propose diverse funding solutions covering won, dollar, and yuan currencies tailored to issuers' financial conditions and market circumstances. A Korea Investment & Securities official said the transaction holds significance as the firm's new entry into the yuan kimchi bond market and expansion of its foreign currency bond underwriting capabilities.
FAQ
What is a kimchi bond and why do Korean companies issue them?
Kimchi bonds are foreign currency-denominated bonds issued in Korea's domestic capital market. Korean companies issue them to secure foreign currency liquidity and diversify their funding currencies by leveraging the domestic investor base, rather than relying solely on won-denominated debt.
Why has yuan kimchi bond issuance increased recently?
The Bank of Korea eased kimchi bond investment restrictions for foreign exchange business institutions in June last year after 14 years. Recent yuan funding rates have remained lower than won and dollar rates, making yuan-denominated bonds more attractive for credit card companies and capital companies seeking cost-effective foreign currency funding.
