Korea Housing Finance Corporation (KHFC), the South Korean Government-owned entity that facilitates the supply of housing finance, successfully priced a 500-million five-year euro social covered bond on June 29, the first covered bond issued by the Asian issuers after the outbreak of coronavirus pandemic.
It is an ESG (environmental, social and governance) bond and its proceeds are slated for predefined green purposes.
KFHC’s initial price guidance of the deal was 37 basis points (bp) over euro mid-swap but strong demand for the bond enabled it to revise the spread 2bp tighter to 35bp at a coupon rate of 0.003%. The final order book amounted to 590 million euros from 42 investors.
About 90% of the bond was sold to Europe investors, with the remaining 10% allocated to Asian and Middle East investors. Also, 88% of the European investors were socially responsible investment investors.
BNP Paribas, DBS, HSBC and ING Baring Securities acted as the joint bookrunners for the transaction.
KHFC initially planned to issue the covered bond during the second half of this year in line with the repayment schedule but moved up the issuance date on fears of a second wave of the coronavirus in the second half of this year.
The issuance of the new social covered bonds at that size and with an almost zero yield illustrates the strong interest and recognition of KHFC’s credit among European investors, given that Singapore and Australia being the two major issuers in the European covered bond market almost suspended the issuance after the coronavirus pandemic.
KHFC, which priced its first ever AAA-rated statutory euro covered bond amounting to 500 million euros in June 2019, returned to the euro bond market this January pricing a one billion-euro social covered bond. It represented the first ever negative yielding euro notes issuance from a non-supranational Asian entity and the first ever covered bond issued with a negative yield in Asia. (Reporting by Hyerim Pi)