Korean Firms Expand Overseas Direct Financing Under Korea Eximbank's 'Credit Umbrella'... Foreign-Currency Bond Issuance Surpasses 1 Trillion Won Last Year

Bond Guarantees Reached 1.1125 Trillion Won Last Year, 587.5 Billion Supplied in First Half of This Year
Sovereign-Level Credit Lowers Funding Costs, Backing Direct Overseas Financing for Companies
Credit Enhancement Instead of Loans, Supporting More Firms with the Same Resources

The volume of foreign-currency bonds issued overseas by Korean companies, backed by guarantees from the Export-Import Bank of Korea, surpassed 1 trillion won last year. Korean companies seeking to raise funds in overseas capital markets leveraged the strong international credibility of Korea Eximbank to obtain capital at lower costs, even amid high interest rates and foreign exchange volatility. As a result, Korea Eximbank is being recognized for its role as a "credit umbrella," supporting the overseas financing of Korean firms.

According to Korea Eximbank on July 30, its total corporate bond guarantee performance reached 1.1125 trillion won last year. In the first half of this year alone, it provided bond guarantees worth 587.5 billion won. The bank's bond guarantee execution increased from 119.4 billion won in 2021, to 734.9 billion won in 2022, and to 1.0025 trillion won in 2023. Although the figure dropped to 323.7 billion won in 2024, it once again surpassed 1 trillion won last year, showing significant growth.

Bond guarantees are a system in which the bank guarantees the principal and interest payments on corporate bonds issued in capital markets. By adding Korea Eximbank's strong international creditworthiness to the bonds, companies can boost investor confidence and secure funding under more favorable conditions.

An official from Korea Eximbank stated, "For companies that find it difficult to issue bonds overseas on favorable terms based solely on their own credit, there is not only the pressure of higher financing costs but also securing investors itself is burdensome. However, when bonds are guaranteed by Korea Eximbank, their credit rating is effectively raised to that of the bank, enabling companies to borrow under better conditions. This is why global companies actively utilize this option."

The foundation for the power of Korea Eximbank's guarantees lies in its international credit rating, which is essentially at the same level as that of the Korean government. Korea Eximbank stably issues foreign-currency bonds based on a credit rating equivalent to Korea’s sovereign rating. Early this year, Moody's, one of the world's three major credit rating agencies, awarded Korea Eximbank an 'Aa2 (Stable)' rating, the same as the national rating. Major institutional investors, such as global pension funds and central banks, constitute the main investor base for its foreign-currency bonds.

Korean Air is one of the leading companies taking advantage of Korea Eximbank’s bond guarantees, as it lacks a global credit rating of its own. Earlier this month, the company successfully issued Samurai bonds worth 20 billion yen in Japan, backed by Korea Eximbank's guarantee. Despite mounting external uncertainties such as high oil prices, interest rates, and exchange rates, Korean Air stably raised funds using the bank’s credit enhancement. In fact, in November last year, the global rating agency S&P assigned the same 'AA (Stable)' rating to Korean Air’s Swiss franc-denominated bonds guaranteed by Korea Eximbank as it did to the bank itself.

The strong international credibility of Korea Eximbank is also evident in its own bond issuance activities. Recently, the bank issued foreign-currency bonds totaling USD 2 billion with the lowest-ever credit spread. The coupon rate was set at the five-year U.S. Treasury yield plus a spread of 21 basis points (1bp=0.01 percentage point), which, based on the current five-year Treasury yield (4.403%), translates to a funding cost of about 4.6%.

This function also helps bridge liquidity gaps for companies when the bank lending market contracts. Even when lending by financial companies declines, as during the global financial crisis, companies can raise funds directly from investors in the capital markets based on Korea Eximbank's guarantee.

For Korea Eximbank, bond guarantees are also a way to enhance the efficiency of policy finance. Unlike direct loans, bond guarantees do not require an immediate cash outlay at the time of issuance, allowing the bank to support the financing needs of more companies using the same policy finance resources.

A financial sector insider commented, "Amid a prolonged period of high U.S. interest rates and increased exchange rate volatility, the bond guarantees provided by Korea Eximbank have become a key instrument for supporting overseas financing by Korean companies. By expanding its role from direct lending to credit support, the bank broadens the scope of policy financing and helps more companies with limited resources, thereby improving the overall efficiency of policy finance."

This content was produced with the assistance of AI translation services.