Euro bonds worth 70.5 million euros with 10-year maturities issued by the Korea Expressway Corp on Sept. 27, 2006 have been liquidized seven months before their maturity date, investment banking sources said recently.
The sources said it was the first foreign currency-denominated bond sale by the special purpose corporation “Neo Cheil Cha.”
The special purpose corporation (SPC), a paper company, bought the bonds and issued ABCP (asset-based commercial papers) worth 97 billion won with local currency and interest earned from the euro bonds, and the paper company sold them in the securities market. The credit rating for the local currency commercial papers was A1, the same as that for the issuer, the Korea Expressway, the highest rating for commercial papers.
NH Investment and Securities Co. acted as the lead manager for the deal and involved in the entire process of the transaction from the purchase of the euro bonds by the SPC, and turning them into the ABCP and selling them.
The securities firm signed a currency swap contract with the SPC to eliminate the currency exchange losses when the euro bonds were turned into ABCP and put up for sale.
It was the first time euro currency assets were turned into local currency ABCP, although there were many cases involving U.S. dollar denominated commercial papers, bonds and deposits, and even Chinese Yuan deposits were turned into local won currency securities for sale at the securities market in Korea, NH I&S officials said.
The fact that the euro bonds were liquidized successfully seven months to go before maturity is owed to the strong euro currency, the officials said.
The exchange rate of the won and the euro stood at 1,197 won per euro when the bonds were issued on Sept. 27, 2006 against 1,356 won per euro when ABCP were issued on Feb. 4. For this reason, the investors in the euro bonds were able make a very good return on their investments earning the currency rate difference of 12.4 percent as the result of the strong euro value.
Officials at the securities firms said investors in other euro bonds or commercial papers would have gotten the same benefits from the strong euro from early this year if they exchanged their euro denominated assets with local won currency assets. They will turn the euro-dominated assets into local won currency assets if they were able to secure the euro currency assets such as the commercial papers or bonds, the officials added.
In the meantime, President Kim Won-kyu of NH I&S said he so made sure that the company supplied information and data that the customers should know, rather than what they wanted to hear, and he plans to continue with such moves by the company by strengthening its R&D activities.
The CEO made the statement when he met with a number of journalists after the company won the award for the 2015 Best Securities Company for Research and Analysis on Jan. 24.
Kim added that training staff for R&D activities would lead to strengthening the company’s operational capacity in the future.
NH I&S was born at the end of 2014 from the merger of Woori Investment and Securities and NH Securities and thus. It’s considered to have a talented group of research staff after the combination of the R&D united of the two firms.
The CEO said the R&D activities should be able to contribute to the development of new strategic products and management policies, in addition to the traditional job of watching for market trends and the development of investment ideas.
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