Hyundai Capital announced on the 12th that it has issued a floating rate bond (FRN) based on the Korea Overnight Risk-Free Rate (KOFR), becoming the first non-bank financial company in the country to do so.
The size of this bond issuance is 50 billion won, with a maturity of one year. The issuance rate added 27 basis points (1 basis point = 0.01 percentage points) to the KOFR. The KOFR is a rate calculated using overnight repurchase agreements (RPs) which are secured by government bonds and currency stabilization securities. This benchmark interest rate is gaining traction in Korea as an important benchmark rate, in line with the global trend of expanding the application of risk-free rates (RFR) based on actual transactions instead of the London Interbank Offered Rate (Libor), and the standardization of floating rate bond issuances based on it.
In particular, the government and the Bank of Korea are encouraging the use of the KOFR, a risk-free rate, instead of the Certificate of Deposit (CD) rate previously used as the benchmark rate for issuing floating rate bonds, as part of efforts to enhance the reliability and transparency of the domestic capital market.
Hyundai Capital has embarked on the issuance of the first KOFR-based floating rate bond in the non-bank sector to actively respond to the government's and the Bank of Korea's policy direction to activate the KOFR.
Lee Young-seok, Chief Financial Officer (CFO) of Hyundai Capital, said, "Based on the belief that Hyundai Capital, which has led the global borrowing market while operating overseas financial institutions in 12 countries, should contribute to the globalization of the capital market in Korea, we proceeded with this issuance." He added, "We plan to continue to expand the issuance based on the KOFR for floating rate bonds going forward."