Korea Housing Finance Corporation (KHFC), a government-owned and controlled corporation in Korea, today closed its first offshore debt offering, a USD 500 million Covered Bond. BNP Paribas and Standard Chartered Bank were Joint Lead Managers (JLMs) while Standard Chartered First Bank and BNP Paribas were Joint Swap Providers for the bond. The transaction is the first statutory covered bond issued from the Asia region, according to the JLMs. The Covered Bond has a maturity date of December 2015 and a fixed rate coupon of 4.125 percent.
KHFC is the sole entity responsible for implementing the Korean government’s housing finance policies, operating with the backing of the government. In the wake of the financial crisis and improving capital markets, KHFC and the Korean Government worked together to diversify funding sources to better fulfill their mission to support future stability in the housing and banking sectors. The Korean Government was also keen to establish a Covered Bond benchmark to assist Korean institutions to access the international capital markets.
Under the KHFC Act, the Korean Government provides KHFC with certain financial, regulatory, and operational benefits in order to achieve their policy objectives. KHFC has the ability, under Article 31, to create “Mortgage Backed Bonds” or Covered Bonds. As a result, investors have a statutory right to the cover pool of mortgage assets if KHFC were to default. As with covered bonds in other jurisdictions, investors value the dual recourse nature of the deal: first to the credit of KHFC and then to the cover pool. Coupled with the robust legislative and cash flow structure, back-up provisions should KHFC default, the transaction achieved Moody’s Aa3 rating, one notch higher than KHFC’s rating and Korea’s sovereign ratings.
The bond met with high demand from investors, considering the transaction was an inaugural asset class. Orders totaled USD 2.72 billion (5.5 times oversubscription) within 13 hours of the launch. More than 130 investors participated with a broad geographic distribution mix (USA: 49%, Asia: 38%, Europe: 13%).
KHFC’s CEO, Mr. Lim noted. “We are delighted to see KHFC taking the first and firm step towards fulfilling its mission. With its maiden Covered Bond transaction, KHFC has now opened the doors for itself and other Korean institutions to access the international covered bond markets with the hope that this will ultimately benefit the average Korean household. The comprehensive vote of confidence by international investors in this transaction is a sign of the strength of our company and our financial system.”
The JLMs, Andy Lai, Head of Securitisation, Asia Pacific at BNP Paribas and Warren Lee, Global Head of Structured Financing Solutions at Standard Chartered Bank commented, “Despite the current challenging market conditions, we believe that quality credits and well structured transactions such as this one can generate enormous success. Being the first statutory covered bond ever in Asia, investors and Moody’s were much more rigorous in their analysis. However, investors welcomed the return of simplicity of this structure with strong market reception as the deal achieved 5.5 times over subscription. We are very pleased to have played a part in KHFC’s and the Korean Government’s initiatives to establish a more efficient housing market and capital markets.”
About BNP Paribas
BNP Paribas (www.bnpparibas.com) is one of the six strongest banks in the world* and the largest bank in the eurozone by deposits. With a presence in more than 80 countries and more than 200,000 employees, including 160,000 in Europe, BNP Paribas is a leading European provider of financial services on a worldwide scale. It ranks highly in its three core activities: Retail Banking, Investment Solutions and Corporate & Investment Banking. In Retail Banking, the Group has four domestic markets: Belgium, France, Italy and Luxembourg. BNP Paribas is rolling out its integrated model across the Europe-Mediterranean zone and boasts a large network in the United States. BNP Paribas Personal Finance is the leader in consumer lending in Europe. In its Corporate & Investment Banking and Investment Solutions activities, BNP Paribas also enjoys top positions in Europe and solid and fast-growing businesses in Asia.
* Rated AA by Standard & Poor’s, i.e. 3rd rating on a scale of 22.
Standard Chartered – leading the way in Asia, Africa and the Middle East
Standard Chartered PLC is a leading international bank, listed on the London, Hong Kong and Mumbai stock exchanges. It has operated for over 150 years in some of the world’s most dynamic markets and earns around 90 per cent of its income and profits in Asia, Africa and the Middle East. This geographic focus and commitment to developing deep relationships with clients and customers has driven the Bank’s growth in recent years.
With 1,700 offices in 70 markets, Standard Chartered offers exciting and challenging international career opportunities for its 75,000 staff. It is committed to building a sustainable business over the long term and is trusted worldwide for upholding high standards of corporate governance, social responsibility, environmental protection and employee diversity. The Bank’s heritage and values are expressed in its brand promise, ‘Here for good’.
For more information on Standard Chartered, please visit www.standardchartered.com
Standard Chartered Korea Limited
Standard Chartered Korea Limited owns 5 companies: SC First Bank which has a nationwide network of 402 branches; Standard Chartered Mutual Savings Bank; Standard Chartered Capital; Standard Chartered Securities; and Standard Chartered Fund Services.
Standard Chartered First Bank (SC First Bank) represents the largest asset that is currently owned by Standard Chartered Korea Limited. With 80 years of history and tradition, SC First Bank was founded in 1929 as Chosun Savings Bank and was renamed as Korea First Bank in 1958, building a reputation as a leader in the wholesale banking sector.
Upon its acquisition by Standard Chartered, Korea First Bank was rebranded as SC First Bank on September 12, 2005 and has continued to grow through a successful integration process. With the vision to become ‘Korea’s best financial partner for growth’ and principle of ‘Customer First’, SC First Bank will use the Standard Chartered global network to act as a bridge between Korean companies and international economies for its wholesale banking clients, while also providing innovative products and differentiated services to fulfill the needs of its consumer banking customers. In addition, SC First Bank, through its various sustainability-related activities, endeavors to demonstrate its commitment to progress and the community.
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