HF issues an offshore covered bond at all-time low rate
- Date 2016-10-11
- Views 581
- Foreign institutional investors place order of USD 1.44 billion
□ Korea Housing Finance Corporation (HF, CEO Kim Jae-Chun) announced on the 11th that it issued USD 500 million in offshore covered bonds at an all-time low interest rate with a maturity of five years*.
* Covered bonds are debt instruments issued by financial institutions and collateralized by assets held by the issuing institutions. Though similar to mortgage-backed securities (MBSs) in that they are secured by a pool of mortgage loans, covered bonds have dual recourse to both the issuing financial institution and the cover pool, thus making them less risky compared to similar asset-backed securities.
□ HF received orders of USD 1.44 billion, about three times the issuance volume, from foreign institutional investors on the 4th and 5th. HF finally set the coupon rate at 2.00%. The spread was set at 0.85%p above the five-year US treasury rate, making the lowest rate among the offshore covered bonds issued by HF.
< Comparison of Spreads of HF's Previous Covered Bonds >
Classification | 1st | 2nd | 3rd | 4th | 5th |
Date of issue | Jul 15, 2010 | Jul 15, 2011 | Mar 7, 2013 | Nov 19, 2015 | Oct 11, 2016 |
Spread compared to the 5-year US treasury | 2.35%p | 2.18%p | 1.00%p | 0.90%p | 0.85%p |
Amount of issue | $500 million | $500 million | $500 million | $500 million | $500 million |
□ Since 2010, HF has issued covered bonds denominated in the US dollars five times with mortgage loans as underlying assets.
□ An HF official said, "Continuous issuance of covered bonds has increased awareness of the corporation among foreign investors. We will issue covered bonds on a regular basis to raise funds for long-term, fixed-rate amortizing mortgage loans."