Export-Import Bank of Korea plans to exceed its $11 billion debt raising target this year, taking advantage of tumbling bond yields to cut funding costs and boost lending to the nation’s exporters.
Kexim has raised $5.2 billion from notes denominated in currencies other than won since Jan. 1, the state-owned bank’s Chief Financial Officer Kim Yoon-Yung said in a May 14 interview in Seoul. The weighted average coupon on its bonds has dropped to 4.34 percent from 5.02 percent at the end of 2010, according to data compiled by Bloomberg.
“The current environment is very good for us borrowers,” Kim said. “As the Korean economy grows, the funding requirement from our clients has gotten bigger and bigger.”
Kexim has provided loans to an Indonesian steel plant part-owned by Posco and a Qatar gas project being built by Hyundai Heavy Industries Co. in the past 12 months to bolster South Korean exporters, whose output is equivalent to half the nation’s economy, Bloomberg data show. Korean borrowers led by Kexim have sold $15.5 billion of international debt in 2012, the most for this part of the year since Bloomberg started tracking the data in 1999.
Kexim plans to sell at least 80 billion yen ($995 million) of Samurai bonds as early as this week, the country’s largest-ever such offering, Kim said. The notes will be offered in two-, three- and five-year maturities and will be priced to yield “slightly higher than we priced last June,” he said.
The lender’s previous 80 billion yen offering of Samurai bonds in June was also split into three parts. Two-year debt was priced to yield 50 basis points more than the yen swap rate, while three-year notes paid a 60 basis-point spread and five-year bonds yielded 73 basis points more than the benchmark, according to data compiled by Bloomberg.
Average yields on Korean dollar-denominated notes slid to 3.35 percent on May 8, the lowest since August, according to JPMorgan Chase & Co. indexes. Korean bonds yield the least among 13 Asian countries after Singapore, the JPMorgan data show.
Investors allocated $14.4 billion to emerging market bond funds in the first quarter, a more than a seven-fold jump from the same period a year ago, according to EPFR Global, a U.S. provider of fund flows.
Korea is Asia’s third-biggest exporter behind China and Japan, and the eighth-biggest globally, according to U.S. government figures.
Kexim, which doesn’t take funds from domestic depositors, borrows from global capital markets to help finance Korean companies’ overseas projects. It typically raises debt in foreign currencies to match the funding needs of its exporter customers.
Posco Steel Plant
The bank contributed $1.2 billion of the $1.73 billion facility for PT Krakatau Posco, this year’s second-largest loan in Asia, data compiled by Bloomberg show. Posco and PT Krakatau Steel’s joint venture is building a steel plant in Indonesia with 6 million metric tons of output a year.
Kexim will also provide $1 billion of project financing to Qatar Petroleum’s Barzan gas-field project, the lender said in December. Hyundai Heavy is part of the engineering consortium developing an offshore platform for the $10.3 billion project.
South Korean exports reached a record $49 billion in July fueled by steel and computer memory chips, before falling to $46.3 billion in April as Europe’s debt crisis crimped demand.
Kexim has the equivalent of $33 billion in bonds and loans due by the end of 2017, according to data compiled by Bloomberg. It is leading Korea’s international debt issuer rankings for the seventh straight year, the data show.
“You always have to be prepared to jump in anytime,” when markets are receptive to bond sellers, Kim said. “When the window is open, just grab it.”