이 기사는 2019년 11월 08일 08:00 thebell 에 표출된 기사입니다.

Investor appetite for kangaroo bonds issued by South Korean firms is getting stronger.

Last month Korea Southern Power Co. (KOSPO) successfully issued a $300 million kangaroo bond - debt denominated in Australian dollars and issued by offshore firms in the Australian market - and received proceeds from investors. The issuance consisted of five-year floating rate notes (FRN). KOSPO met a strong demand from Australian institutional investors, which helped the utility firm to issue the bond at a rate of 97 basis points above the three-month bank bill swap rate (BBSW), near the low end of the initial price guidance.

What's notable is that nearly 75 percent of the issuance went to onshore investors. This contrasts with the usual case where less than 40 percent is allocated to Australian investors, while most of the issuance is sought by Asian institutional investors.

In May, the Export-Import Bank of Korea (Eximbank), the first issuer of kangaroo bonds this year among South Korean firms, also drew bids over 1.7 billion Australian dollars, which was more than three times the size of the issue. Demand was the largest for kangaroo bonds issued by Asian firms. Such an oversubscription is considered unusual, given that kangaroo bonds are normally priced based actual demand. Thanks to a strong demand, the Eximbank issued the bond at the lowest rate among Asian financial institutions.

Investors' interest in kangaroo bonds issued by Korea Development Bank (KDB) this summer was also strong. In a two-tranche issue, KDB succeeded in reduce borrowing costs by around 10 basis points compared to its latest U.S. dollar-denominated bond sale, aided by abundant liquidity and short supply of senior bonds in the Australian debt market.

Such strong demand indicates the heightened status of South Korean issuers in a conservative kangaroo bond market. Australian investors reportedly asked KOSPO to issue such bonds regularly. This has confirmed the investment demand for senior kangaroo bonds issued by non-financial firms, not only by high-quality financial firms.

If the positive mood continues, more South Korean firms could join in the issuance of Australian dollar-denominated notes, making the kangaroo bond market a center of cross-currency bond deals from South Korean issuers.

"Investors in the U.S dollar-denominated bond market are becoming more selective, whereas, in the kangaroo bond market, issuers can take advantage of abundant liquidity and a stronger investor appetite," said an industry insider.

Meanwhile, volatile swap rates are considered one of the disadvantages, as most of the kangaroo bond issues by South Korean firms involve the U.S dollar-to-Australian dollar swap transactions.

In addition, kangaroo bonds are not familiar to most of local issuers. "Domestic firms seem to remain reluctant [to issue Australian dollar-denominated bonds] as such cases are still rare," said another industry insider.

(By reporter Pi Hye-rim)