News eDaily19 Apr 2018

South Korea:Hanwha Life issues perpetual bonds to raise capital

19 Apr 2018

Hanwha Life Insurance has raised US$1 billion in perpetual bonds at a coupon of 4.70%, 200 basis points over the five-year US treasury yield of 2.70%.

It is the second largest Korean perpetual bond issue (perp) after Woori Bank’s dollar-denominated issue in 2007. The life insurer said its debt drew overwhelming demand from 73 institutional investors during the book-building session, reports Pulse News. Perps usually pay higher than normal debt yields.

The company said the issue would enhance the image of not only Hanwha Life but also Hanwha Group as a whole. Foreign investors showed a voracious appetite for the debts as they yield high returns by one of the major life insurers in Korea boasting high creditworthiness.

Perp, which unlike traditional debt is unredeemable, has been popular among insurers as means for increasing capital ahead of new capital guidelines since they fall under equity capital category and not as debt, and therefore does not hurt balance sheet.

The company said the proceeds will be used to bolster capital ahead of the introduction of IFRS17, new accounting rules for insurers that will take effect in 2021. Last year, it also raised KRW500 billion through the sale of hybrid securities.

The bonds have a 30-year maturity but are deemed perpetual as the issuer can push back the maturity. Hanwha Life expects the debt issuance would raise its risk-based capital from 206% as of the end of last year to more than 230% this year.

 

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