Korea Seven, the South Korean operator of convenience store giant 7-Eleven, successfully raised $30 million from its issuance of shogun bonds, which refer to bonds issued in Japan, in a non-yen denomination, by foreign entities.
Korea Seven issued a $30 million (36.9 billion won) shogun bond on March 25, sources familiar with the matter said. The company sold the bond at a rate of 105 basis points above the Libor rate.
The bond was issued through a private placement, all of which was acquired by Sumitomo Mitsui Banking Corporation (SMBC), making the issuance practically a bank borrowing.
Korea Seven had been preparing the issuance before the spread of the coronavirus, but the actual offering took place on March 25 due to delays in its fundraising schedule. In the meanwhile, global financial markets have been hit hard by the spread of the coronavirus and Korea Seven’s plan to sell won-denominated bonds in a public offering has been postponed indefinitely.
With Korea Seven’s sale of shogun bonds, domestic retailers start to pay attention to the Japanese bond market. Currently, South Korean bond market conditions are so unfavorable that even an AA-rated bond offering doesn’t go smoothly. On the contrary, domestic retailers may raise funds relatively easily by selling shogun bonds if a company and a Japanese bank agree to some fundraising conditions in a de facto loan from the Japanese bank.
Domestic retail giants like E-mart raised funds via shogun bond issuance. E-mart sold $150 million shogun bonds in 2016 and 2019, respectively. It is said that Lotte Group and Shinsegae Group are paying attention to the Japanese bond market as their subsidiaries sold shogun bonds in the past.
(By reporter Pi Hye-rim)