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Capital Markets

Covered bonds: Kookmin has good news for Asia bond market

$1 billion deal six times oversubscribed; Could provide covered bond template for region’s other banks

In Hye Weon, Kookmin

"Even now there is no covered bond law. We had to rely on the existing ABS laws and try to structure it to meet those rules"

In Hye Weon, Kookmin

Korea’s Kookmin Bank, along with bookrunners HSBC and Citi, has pulled off a counter-intuitive bond issue that has the region’s bankers buzzing with chatter. And they say there is the likelihood of more to come from the same source. It’s good news in a region desperate for some. The Kookmin bond has tapped into a sector that became deeply unfashionable globally after the sub-prime meltdown in the US – mortgages. But Kookmin and the other banks involved haven’t just managed to get away a pioneering $1 billion covered bond against what appears to be market odds and perceptions – they did so on reasonable terms with a deal that HSBC and Citi managed to get six times oversubscribed.

"The success of this bond shows there’s a good appetite for this type of product out there if structured properly," says Will Ross, HSBC’s Hong Kong-based head of asset-backed securities and structured bonds for Asia-Pacific, who led the Kookmin mandate.

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