South Korea’s state-run Small & Medium Business Corp. (SBC) has successfully issued its 10-year dollar-denominated bonds at the country’s lowest borrowing cost, benefitting from the recent upgrade in Korea’s sovereign credit rating. It was the first time for SBC to sell global in 10 years.

According to multiple sources from the financial investment industry on Tuesday, SBC drew $3.3 billion from investors in London, Hong Kong, and Singapore for a total of its $500 million worth dollar-denominated debts with 10-year maturity. SBC initially planned to issue $400 million worth of bonds, but decided to increase the amount to $500 million to meet higher-than-expected demand from Asian insurance firms and European asset management firms.

Strong appetite for SBC debts has led the competition rate to surge to 6.6 to 1, sending its 10-year bond coupon rate to 2.236 percent a year, the lowest ever among global bonds issued by Korean companies. The yield is even lower than that of the 10-year $400 million worth global bonds sold by Korea Gas Corp. last month at a yield of 2.325 percent.

Sources note that SBC was able to successfully sell global bonds after Korea’s sovereign rating has been upgraded by a series of foreign credit rating agencies since last year, boosting foreign investors’ credibility for the country’s debts. Citing relatively sound economic growth and flexible fiscal and monetary policy, global credit ratings agency Standard & Poor’s (S&P) earlier this month raised Korea’s credit rating from AA- to AA in 11 months after it upgraded it from a positive A+ to a stable AA- in September last year.

Overall market liquidity has also improved amid seasonally low supply of bonds in Asia in August, market experts said.

The spread of SBC bonds against 10-year U.S. treasuries is 0.675 percentage points - the lowest level among policy financial institutions including that of Korea Development Bank (0.875 percentage points) and Export-Import Bank of Korea (0.825 percentage points).

SBC plans to use the proceeds from the global bond sale in renewing existing foreign currency bonds maturing in the second half of the year.

SBC’s bond sale advisers are BNP Paribas, Nomura Financial Investment, and Credit Suisse.

By Ko Min-suh

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