now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Treasury & Capital Markets
How KDB expands its LCY funding channels
One of Korea Development Bank’s (KDB) funding strategies is the diversification of its financing channels, being open to all currencies in its search for competitive pricing.
Chito Santiago 15 Aug 2017

One of Korea Development Bank’s (KDB) funding strategies is the diversification of its financing channels, being open to all currencies in its search for competitive pricing.

During the past 12 months, KDB has tapped various local currency (LCY) bond markets, including Korean won, Hong Kong dollar, CNH, Australian dollar, Singapore dollar and most recently for the first time, the Swedish krona.

In its debut deal, KDB priced earlier this August two krona-denominated medium-term notes amounting to 400 million krona (US$49.20 million) each maturing in August 2027. Arranged by Credit Agricole, the notes have coupons of 1.815% and 1.830%, according to details supplied by Thomson Reuters.

After currency swap to the US dollar, the 10-year krona notes were priced similar to the pricing of KDB’s five-year US dollar public bond, Young Ae Ahn, deputy general manager, global funding team 1 at KDB’s treasury department tells The Asset.

Young describes KDB’s foray in the krona bond market as a reverse inquiry transaction. “This is a funding activity of takedown from our global medium-term note (GMTN) programme. Upon receipt of the investor’s inquiry, one of the dealers of the GMTN programme asked us whether we are interested in issuing krona-denominated bond.”

In expanding its funding sources, KDB usually meets investors through regular roadshows twice a year and explains its policy roles and strong linkage with the government. This year, Young says KDB’s funding requirement is slightly larger than the refinancing size of the bonds maturing in 2017. So far, it has raised about US$2.8 billion through public issues.

Outside of Korean won, KDB has also raised a total of A$125 million (US$99.20 million) so far in 2017, according to Thomson Reuters, arranged by ANZ and Credit Agricole.

Young cites pricing as a key factor in choosing its funding channels. “This year, the euro and Japanese yen are more expensive than the US dollar. We try to look around for more funding markets and see how these markets can provide us with competitive pricing.”

As one of Korea’s leading policy banks, KDB is an active issuer in the international debt capital markets. In June this year, it joined the green bond bandwagon when it priced its maiden transaction amounting to US$300 million. The five-year bonds garnered a final demand of US$650 million and were sold mainly to bank treasuries, fund managers, central banks, sovereign wealth funds and pension funds.

Earlier in February, KDB printed a three-tranche bond offering totaling US$1.5 billion, equally split at US$500 million each. The deal attracted a total order book of US$4.1 billion from about 200 accounts.

The first tranche was a three-year floating rate note (FRN) priced at par and at a spread of 45bp over three-month Libor, a five-year fixed rate note with a coupon of 2.625% to offer a yield of 2.735%, and a five-year FRN, which was also priced at par and at a spread of 70.5bp over three-month Libor.

It also raised US$100 million in March through a floating rate certificate of deposit and US$70 million in January through another medium-term FRN.

Photo: Wikipedia

Conversation
Ben Wong
Ben Wong
general manager, technology & innovation
New World Development
- JOINED THE EVENT -
Exclusive roundtable
Unlocking the potential of sustainable supply chains
View Highlights
Conversation
Xiaolin Chen
Xiaolin Chen
head of international
KraneShares
- JOINED THE EVENT -
In-person roundtable
Securing the future
View Highlights