KHFC issues first foreign currency-denominated covered bonds in Korea

The Korea Housing Finance Corporation (KHFC, CEO Joo-jae Lim) announced on April 28, 2011 that it issued the nation′s first mortgage-backed foreign currency-denominated statutory covered bonds (MBB) of US$200 million through public subscription. 

The covered bonds are backed by KHFC′s variable-rate Bogeumjari loans with a switch option and have a maturity of two years. The coupon rate is '3-month Libor+1.1 percent′ and the bonds were financed at ′CD+0.1 percent,′ which is 0.2%p less than the variable-rate MBS through a Korean won swap. The deal was arranged by foreign banks present in Korea, including ING Bank.  

With the issuance of foreign currency-denominated covered bonds in Korea, which followed the issuance of the first statutory covered bonds in Asia in July 2010, KHFC is not only able to perform advanced securitization and expand the base of investment but also to secure a low-cost means of financing in addition to commercial paper (CP), bonds and debentures, fixed-rate mortgage-backed securities, and overseas covered bonds. 

″KHFC will secure a stable source of long-term housing finance by activating the issuance of covered bonds,″ said a KHFC official. 

On the same day, KHFC also issued KRW432.1 billions of securities backed by mortgages held by Samsung Life (MBS).