Shinhan Financial Group, a major financial holding firm in South Korea, issued $500 million (598.2 billion won) worth of foreign currency-denominated “social bonds” on July 7 to support companies hit by the coronavirus fallout. This is the first time that South Korea’s financial holding firms sold social bonds to foreign investors.
The interest rate of the Reg S/144A 5.5-year offering was set at the five-year US Treasury note plus 105 basis points (bp), 45bp tighter than the initial price guidance, with a coupon of 1.350% to offer a yield of 1.365%. Orders for the new offering from 134 institutions reached $2.3 billion, about 4.5 times their issuance size.
Shinhan plans to use the proceeds from the issuance to help small and medium enterprises (SMEs) and low-income earners recover from the coronavirus.
Social bonds, which finance projects with a positive social impact, are experiencing a major upswing amid the coronavirus pandemic, with investors showing strong demand for them. Prior to Shinhan’s issuance, its subsidiary Shinhan Bank issued social bonds of $50 million to financially support local businesses in March, followed by KB Kookmin Bank’s social bonds of 400 billion won in April for meeting similar social needs.
The global issuance of social bonds has reached record levels and more than quadrupled so far this year, as conscious investors combine profit and purpose to address rising inequalities created by the coronavirus, CNBC recently reported citing S&P Global Ratings. With unemployment spiking around the world, rising fatality rates and strained health-care systems, S&P expects social bonds to emerge as the fastest-growing segment of the sustainable debt market in 2020, even as credit conditions weaken.
Meanwhile, Shinhan hired BNP Paribas, Bank of America Merrill Lynch, Credit Agricole, JP Morgan, and Mizuho Securities to arrange the deal. Another subsidiary, Shinhan Investment Corp, acted as a joint lead manager. (Reporting by Hyerim Pi)