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Kexim returns to Thai bond market
Local currency bond markets offer not just a stable, but a customized funding in terms of size and tenor for Korea’s policy bank, Export-Import Bank of Korea (Kexim).
Chito Santiago 2 Sep 2015
For policy bank Export-Import Bank of Korea (Kexim), local currency bond markets offer a stable and customized funding in terms of size and tenor.
 
In addition to investor diversification, the local currency funding becomes more important when the major debt markets, including the US dollar and euro, are volatile and stressed.
 
As such, Kexim returned to the Thai baht bond market as it priced on August 31 a 10 billion baht (US$280 million) offering, representing the largest single tranche issuance from a foreign issuer. With a coupon fixed at 2.18%, the three-year deal was priced at 45bp over the Thai government bonds, or at the tight end of the marketing range of between 45bp and 50bp. HSBC and Krung Thai Bank acted as the joint bookrunners for the transaction.
 
In executing the deal, Kexim achieved the maximum size that it obtained the approval from the Thai ministry of finance (MoF) in January this year. “We have monitored the market conditions since we obtained the approval from the MoF,” Kexim senior executive director Sung-hwan Choi tells The Asset. “We have spotted an improving Thai baht bond swap spread, providing better US dollar swap pricing. With close monitoring and seizing a good window, we were able to achieve size and pricing, while garnering over 17 billion baht in demand.”

Indeed, the fund raising once again demonstrated Kexim’s ability to access the debt markets amid volatile global market environment. As in the previous years, it tapped the local currency markets frequently in 2015, including CNY, Hong Kong dollar and Singapore dollar. In August, it returned to the Kangaroo bond market with a dual tranche A$650 million (US$458 million) deal due February 2021, split into A$350 million floating rate note and A$300 million fixed rate note.
 
In its first significant fund raising in 2015, Kexim tapped the US dollar bond market for US$2.25 billion in January in two tranches, comprising US$1 billion for five years and US$1.25 billion for 10 years.
 
This is the eight time that Kexim has tapped the Thai baht bond market – one of the top five markets in Korean non-G3 funding avenue. “Against the soft tone in global markets at the moment, the Thai baht bond market allows us to fund US$280 million equivalent in size and this represents how the local currency funding and well-prepared funding strategy are important for frequent borrowers,” says Choi.

 

The Thai baht bond market has had lack of highly-rated Thai baht paper from foreign issuers, particularly in the past two years. The Thai baht swap market has been generally stable, although the onshore interest rate environment has changed in line with the Thai economy and global market conditions.

 

“Amid the global market turmoil seen last week, the Thai baht bond market was generally stable and the Thai baht swap spread moved up. This allows us to seize the good market window for our issuance,” adds Choi. “While we provide quality AAA paper to local investors, we manage to achieve our pricing target based on improved Thai baht swap spread.” 

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