The Korean Development Bank (KDB), the state-owned entity focused mainly on providing funding for major industrial projects, has announced it will arrange the issue of foreign currency bonds for domestic corporates struggling to access funds directly.
The first of such deals, and the first dollar-denominated deal launched into the domestic market, will be an $80 million transaction for Hanwha Chemicals. Hanwha, which is rated BBB-, will then convert the proceeds from the transaction into Korean won under a dollar swap deal with the KDB.
Other corporations believed to be lining up deals with KDB include Hyundai Motor Group and the LG Group, although an official at the KDB would not confirm this.
Hanwha's bonds will carry a maturity of three years and will be floated above three month or six month Libor. Although exact pricing has yet to be determined, the KDB official told FinanceAsia it would be "between 3% or 4% above the London interbank rate".
The bonds will then be held by the loans department of the KDB, the official confirms.
Although the bond program is a commercial project, the KDB also supports the government with its aims to help local companies facing financial difficulties.
The KDB is fairly core to that 'helping hand' process. It has been supporting, along with other creditors, the 'bankrupt' Daewoo Motor Group in its restructuring phase with the best part of W419.6 billion ($320 million) in the first quarter of this year.
The bank has also agreed this month to buy W88 billion of bonds that will mature this month from Hynix Semiconductor and Ssangyong Cement Industrial as part of the government's corporate debt underwriting scheme.
Around W65 trillion of corporate debt issuance will mature in 2001 and the government came up with its scheme to avoid a glut of defaults filling the local market and shaking investor confidence.
The one-year plan will see the KDB help to repay 80% of maturing corporate debts as long as the issuer can account for the remainder. Not economic perhaps, but it should help to prevent many more high profile bankruptcies - for the next year at least.