World Economy

South Korea to Sell $7 Billion in Won Bonds

Korea Resources Corp is planning a sale of dollar bonds.Korea Resources Corp is planning a sale of dollar bonds.

South Korea plans to sell a combined 7.6 trillion won ($7.04 billion) in state bonds this month, the finance ministry said. But the final amount of debts to be sold could be larger because the ministry plans to sell an unspecified amount of debt with a 50-year maturity as well.

The government will issue 1.7 trillion won in bonds with a maturity of three years and another 1.65 trillion won in five-year bonds in January, according to the Ministry of Strategy and Finance, Yonhap reported.

It also plans to sell 1.8 trillion won in 10-year treasurys and a combined 2.45 trillion won of bonds with a maturity of 20 or 30 years. The ministry said it will decide on the amount of 50-year state bonds to be issued on March 13.

Earlier, the ministry said it will decide on bond issuance after taking into account various factors. In October 2016, the ministry floated its first 50-year state bonds, the nation’s longest-ever maturity.

The finance ministry said the government will repay state debts worth 100 billion won this month. In February, sales of treasurys reached 9.02 trillion won.

Meanwhile, Korea Resources Corp is planning a sale of dollar bonds, in a test case of how much market confidence there is that the government will continue to support struggling state-owned companies, Bloomberg said.

The energy and resources firm has hired five arrangers for US dollar-denominated notes to repay $500 million of debt that will mature in May, a person familiar with the matter said last week. South Korea’s parliament rejected a bill late last year to boost the company’s capital, after its 3.7 trillion won ($3.5 billion) of outstanding debt neared a legal limit, and bond investors are watching the government’s next move.

Korea Resources, which was established in 1967 to supply commodities to the nation’s burgeoning corporate sector, has been hit by large losses in recent years due to depressed commodities prices and troubles at its key mines.

Any signs that the government is pulling support could fuel concern about the status of other state-owned firms, potentially leading to rapid credit-rating downgrades for a sector that’s still a major employer in Korea, according to Shinhan Investment Corp.

“I would view this bond sale as a positive sign to the credit as I believe it signifies unchanged government support, at least for a few more years,” in that the government wouldn’t allow the firm to issue debt if it was considering pulling support, said Anthony Leung, the Hong Kong-based director of Asia-Pacific credit research at Wells Fargo & Co.

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