HF Issues COVID-19 Euro Social Covered Bonds, the First of Its Kind in the Non-Euro Region 

- HF reaches a wider audience of investors via conference calls and online roadshows 

- As in its January deal, this second consecutive bond issuance for this year offers a coupon rate of almost zero

Korea Housing Finance Corporation (HF, CEO Lee Jung-Hwan) announced on June 30, 2020, that it issued 500 million euros in COVID-19-related social covered bonds* with a coupon rate of almost zero (in euros) to support low-income people suffering financial hardships due to the prolonged COVID-19 crisis.

    * Covered bonds are debt securities issued by a financial institution that are secured by a pool of mortgages or other prime assets. Covered bonds provide investors with both recourse against the issuer and a preferential claim against the underlying cover pool over third-party claims. 

The covered bonds are issued with a maturity of five years and a coupon of 0.003%, equivalent to a spread of 35 basis points over a five-year euro mid-swap rate (-0.347%). Given its January bond issuance, this marks HF’s second consecutive euro issuance of the year at a coupon rate of nearly zero.

It is also the first COVID-19 covered bond issuance in a social bond* framework in non-EU countries. HF will use the funds raised to provide state-sponsored mortgage loans to low- and middle-income households in real need of buying a home, addressing their difficulty in borrowing money due to the COVID-19 pandemic.

    * Social bonds are special-purpose bonds issued to raise capital for funding projects designed to achieve socially responsible goals. The use of the funds raised by social bonds is restricted to projects with a positive social impact, such as housing welfare and welfare projects.

As the continuing global spread of the virus has blocked roadshows and in-person investor meetings in Europe, HF turned to virtual investor interactions via conference calls and virtual roadshows, successfully expanding the audience of investors into Italy, the United Arab Emirates, and other countries. The transaction was joined by a total of 42 institutional investors. They can be classified into ▲ European central banks and international organizations (29%), ▲ large asset management investors (40%), and ▲ pension funds and banks (31%).

   ※ ESG (Environmental, Social and Governance) investors account for 88% of the total investors.

HF CEO Lee Jung-Hwan said, “Despite a growing number of concerns that are affecting financial markets, such as a potential second wave of the coronavirus, HF succeeded in clinching the deal at a coupon rate of almost zero for the second time in a row as the stability of our covered bonds and the rarity of our COVID-19 social bonds were highly recognized by international investors. I hope that this bond issue will help many low-income families buy their home.”

He went on to say, “HF, as one of Asia’s leading covered bond issuers, will increase our issuance volume and make other efforts to diversify our sources of funding for low-rate, state-sponsored mortgage loans.”