Clifford Chance aids Korean FX bond sale

South Korea bonds exchange

South Korea has issued US$1.45 billion worth of foreign exchange stabilization bonds at record low interest rates. The Ministry of Economy and Finance issued US$625 million worth of 10-year bonds and €700 million (US$828 million) worth of five-year bonds.

These are the first government bonds to be offered by South Korea in international markets with a negative yield, minus 0.059%, while the dollar-denominated bonds benefit from an all-time low interest rate of 1.198%. South Korea is also the first non-European nation to issue euro-denominated bonds with a negative interest rate.

UK firm Clifford Chance acted as legal counsel to the six underwriters on the Securities and Exchange Commission-registered bond offering: BNP Paribas, Bank of America, Citigroup, JP Morgan, Mirae Asset Daewoo and Standard Chartered Bank.

The cross-border team was led by partner Richard Lee with assistance from registered foreign lawyers Song Yue and Sye Kim.

“The issuance of the foreign currency bonds will help to manage Korea’s foreign exchange reserves,” said Lee. “It also reaffirms global investors’ sureness in the economy of Korea, even during the uncertainties of covid-19.”

The stabilization bonds are sold to raise funds necessary for smoothing operations in the foreign exchange market. Its yield acts as a benchmark for debts sold overseas by the private sector.

The ministry expects the foreign currency reserves secured through the bonds to boost the domestic financial market’s response to uncertainty, contribute to the smooth supply of foreign currency at public and private organizations, and help diversify loan currencies.