The borrower has mandated BNP Paribas and Standard Chartered to manage its debut covered bond, which will be only the second issue in the format from any Asian borrower, following a $1bn deal for Korea’s Kookmin Bank at the start of May.
KHFC sent out a request for proposals in March that did not specify what market it wanted to raise money in. Bankers pitching for the mandate said at the time that the RMBS market was the most likely place for the KHFC to raise money, and the borrower was thought to be keen on issuing a deal in the format.
The borrower picked BNP Paribas and Standard Chartered after sending out the RFP and although it has now it has decided to issue a covered bond, there has been no new bidding process.
Bankers in Asia said the hurdles to accessing the European investor base — where ultra-cautious investors have many other options — are still as high as they were when Kookmin Bank was preparing its own deal. This makes it more likely that KHFC will choose to tap the dollar investor base, following the pattern set by Kookmin’s deal. However, this has still not been decided.
Woori Bank and Shinhan Bank recently mandated banks to work on RMBS issues, after having begun work on covered bond issues. Shinhan picked HSBC and BNP Paribas to lead its RMBS deal, and Woori chose Deutsche Bank.
Government-owned KHFC was set up in 2004 to improve mortgage market liquidity. It guarantees mortgages and student loans and issues mortgage backed or student loan backed securities in the domestic market.
Read EuroWeek on Friday for more on KHFC’s covered bond plans.