Hyundai Capital announced on Thursday the successful issuance of South Korea’s inaugural publicly offered offshore yuan-denominated kimchi bond by a financial institution.
The 660 million yuan ($95.6 million) bond offering boasts a two-year maturity and a coupon rate of 2.2 percent. KB Securities served as the lead manager for the transaction.
Kimchi bonds, denominated in foreign currencies, are sold within Korea’s domestic capital market, providing issuers with the opportunity to access local investors for international funding. This deal represents the first instance of a publicly offered yuan-denominated kimchi bond. Prior to this, a Korean financial institution issued a yuan-denominated kimchi bond through a private placement in 2014.
Hyundai Capital highlighted that this issuance is facilitated by the recent relaxation of foreign exchange regulations by local authorities. Last year, the central bank removed restrictions on kimchi bond investments by foreign exchange banks for the first time in 14 years. This measure aimed to revitalize the market amidst global currency volatility and concerns surrounding Korea’s foreign currency liquidity.
Issuance of kimchi bonds has gained momentum this year. Including Hyundai Capital’s $50 million kimchi bond sale last month, four domestic institutions have collectively raised $380 million through these bonds year-to-date.
The yuan-denominated sale also signifies a move toward diversifying funding sources beyond the US dollar. Hyundai Capital stated that the transaction allowed them to tap into the liquidity of the rapidly growing offshore yuan market.
“This is particularly significant as the deal was completed despite increased volatility in global funding markets following the recent escalation of conflict in the Middle East,” noted Chief Financial Officer Lee Young-seok.
Lee emphasized that the issuance demonstrates the company’s ability to access capital markets even during uncertain times. He further stated that the company plans to continue expanding its funding channels as authorities further ease kimchi bond regulations to bolster foreign-currency liquidity.
jwc
