The Export-Import Bank of Korea announced recently that it successfully issued AUD 500 million ($510 million) in Kangaroo Bonds in Australia’s bond market. The issuance represents the largest issuance of the bond by a Korean institution.

 Australian dollar-denominated bond issued by foreign institutions in Australia’s capital market.

The interest rate for the bond was 1.90% over the Bank Bill Swap (BBSW), the short-term interest rate applied in Australia. The rate is more than 100bps lower than that of other Kangaroo Bonds issued by a Korean institution this year.

The bond issuance is significant in that the Bank successfully targeted Australian investors who have a reputation for being conservative and sensitive to issuance rates.

Australian investors normally demand a high premium for a foreign institution’s first issuance. Korea Eximbank, as the leading bond issuer in Korea, made efforts to lower the issuance interest rate in consideration of subsequent bond issuances by Korean institutions.

A representative of the Bank commented, “We noted that Australian investors, after suffering losses in Europe, sought to diversify into Asian markets. Last week, we held an IR seminar for local institutional investors.” 

As a result, we received over AUD 800 million worth of orders by closing, four times our target amount, from over 100 institutions.

Middle Eastern central banks and oil money participated in the issuance in addition to Australian insurers and asset managers. The success of the issuance is regarded as a result of strong networks with Middle East institutions. The Bank has concluded MOUs with 17 major financial institutions and hosted the MENA Conference since Chairman Kim’s appointment to Korea Eximbank.

Korea Eximbank raised $7.8 billion (71% of its target of $11 billion) so far this year, leading other Korean institutions in foreign currency borrowings. 

In addition to the Kangaroo Bond, Korea Eximbank issued $4.5 billion this year through diverse channels, obtaining investments from non-dollar-denominated bond markets in Japan, Switzerland and Brazil.

The Export-Import Bank of Korea announced on August 8 that it will expand the Bank’s credit line for the Untied Two-Step Loan* extended to Sberbank**, the largest state-owned bank in Russia, from USD 200 million to $700 million.

Chairman Kim  Yong-hwan  of Korea Eximbank and Chairman Herman Gref of Sberbank met at Sberbank headquarters in Moscow to sign the agreement increasing the credit line.

 Untied Two-Step Financing provides credit to banks overseas, which in turn, will provide loans to Korean firms or local firms trading with Korean firms. 

 Established in 1841, Sberbank is Russia’s largest state-owned commercial bank and currently accounts for 33% of loans and 46% of savings in Russia’s banking sector. As of 2011, Sberbank ranked 49th in the world in terms of equity capital.

 As of July 2012, Korea Eximbank has interbank export credit agreements totaling $1 billion with six Russian banks. 

During the signing ceremony, Chairman Yong Hwan Kim commented, “The signing of this agreement will allow us to more effectively provide financing to our firms via Sberbank’s network within Russia. We will provide funding for Korean firms participating in energy, natural resource, construction, and infrastructure projects implemented by the Russian government as well as projects in the Far East and Siberia.”

During his visit, Chairman Kim also signed a trade refinancing agreement with Alfa Bank, the largest private bank in Russia.