"Is It Necessary in Korea?... 'Meta Won Bond' Unlikely to Happen Soon" [Click e-Market]

Non-Dollar Fundraising Surges Among Hyperscalers
Speculation Rises Over Meta’s Potential Fundraising in the Korean Won Bond Market
"Small Issuance Size... Limited Immediate Incentives for Issuance"

Recently, there has been speculation in the market regarding the possibility of Meta, a global big tech (large information technology company), issuing won-denominated bonds in Korea. However, analysts in the securities industry believe that the likelihood of immediate execution is low, citing both cost and demand factors.

On August 31, Junsu Kim, a researcher at NH Investment & Securities, stated, "Domestic institutional investors do not offer a significant premium, especially given that the raised won funds would have to be converted back into US dollars." He emphasized, "There is little compelling reason for Meta to choose to issue bonds in Korean won."

Amazon Also Issued Debt in Euros and Canadian Dollars

This year, global giants have looked beyond the US dollar to raise funds. In March, Amazon issued bonds worth 14.5 billion euros, and in June, it floated 14 billion Canadian dollars of bonds. The strong demand from local investors in Europe and elsewhere allowed Amazon to borrow money more advantageously, at lower interest rates. Kim explained, "If such favorable conditions emerge, it is possible that the won bond market could also be utilized as an alternative funding source by big tech companies."

However, when considering actual funding costs and potential issuance size, the attractiveness of the won bond market is seen as limited. The cost of borrowing money by issuing bonds is high. Meta’s global credit rating (AA-) is similar to the sovereign credit rating of Korea (AA). Based on this, the interest rate for won-denominated bonds would likely fall in the mid-to-high 4% range. Moreover, when factoring in additional fees for converting the borrowed won into US dollars (currency swap), the end result is that borrowing directly in the US dollar market would be less costly, making the won market less economical.

The issuance size also falls short when compared to the tens of billions of dollars that Alphabet and Amazon have raised this year in markets like Canada and Switzerland. Kim pointed out, "The market is discussing a potential deal of about 700 million dollars; given all the associated expenses, there is little incentive for Meta to enter a new market just to secure this amount."

Could WGBI Inclusion Make the Won Bond Market More Dynamic?

There is also no clear need for Meta to use large amounts of Korean won. Unlike foreign banks that previously issued bonds in Korea to use the won funds directly, Meta currently does not have any major projects in Korea, such as building data centers, that would require substantial won-denominated funding.

However, from a long-term perspective, the possibility remains open. This is because a major change is on the horizon: the inclusion of Korean government bonds in the World Government Bond Index (WGBI). There is precedent for this, as Canada also saw more global companies raising capital in Canadian dollars after Canadian bonds were included in a global index.

Kim added, "It will be important to watch whether the demand for won-denominated bonds among foreign investors and the swap environment further improve after Korea’s inclusion in the WGBI. Should these changes lead to lower funding costs, the Korean won bond market is likely to become a more attractive alternative funding source for global corporations in the future."

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