Hanwha Chemical Corp., a global chemical manufacturer in Seoul with over KRW3.631 trillion (USD2.8 billion) in assets, entered a currency swap last month, converting a U.S. dollar loan into Korean won. The loan, a USD100 million six-month LIBOR facility, will be used toward the purchase of petrochemicals, said Y.K. Kang, manager of foreign exchange in Seoul. In the swap, Hanwha pays dollars and receives won at an exchange rate of KRW1,308.30. The maturity mirrors the life of the loan. Kang added that the firm is leaving the remaining 50% of its USD200 million loan portfolio unhedged to participate in potential won upside against the dollar.
The counterparty for the currency swap is the Korea Development Bank, which was selected on the basis of pricing. Kang expects the company to return to the swap market in a similar fashion in the second quarter, when it will likely seek additional loans for supplies. An official in the foreign exchange department at KDB declined comment, citing client confidentiality.
Hanwha has also entered won-denominated interest-rate swaps in the past, noted Kang, adding that if interest-rates look to rise later this year, it may consider entering additional interest-rate swaps, paying fixed rates and receiving floating.
