PRNewswire
Seoul [South Korea], June 18: As financial market volatility continues to rise, Korean credit card companies are rethinking how to raise funds. Unlike banks, specialty finance companies in Korea do not take deposits and have traditionally relied heavily on bond issuance for funding. But with interest rate volatility and funding costs increasing, diversifying funding channels has become an increasingly important priority.
Against this backdrop, Hyundai Card, one of Korea's leading financial companies, has been expanding its funding portfolio across a wider range of instruments, including offshore public bonds, syndicated loans, asset-backed securities (ABS) and, more recently, Kimchi bonds.
On June 17, Hyundai Card announced that it became the first Korean non-bank lender to issue a dual-currency Kimchi bond, securing funds in both U.S. dollars (USD) and Chinese yuan (CNY). The bond was issued as a green bond in accordance with the Korean Green Taxonomy Guidelines, with proceeds to be used for financial services related to Hyundai Motor Group's eco-friendly mobility businesses, including electric vehicles (EVs) and fuel cell electric vehicles (FCEVs).
This issuance is a direct extension of Hyundai Card's ongoing Kimchi bond strategy this year. In January, Hyundai Card became the first Korean company in 15 years to resume public Kimchi bond issuance for the purpose of converting the proceeds into Korean won, effectively reopening a market that had remained largely dormant. Since then, companies including LG Electronics and Lotte Property & Development have also entered the Kimchi bond market, suggesting that the funding diversification trend initiated by Hyundai Card is spreading across the broader market. Hyundai Card also issued an USD 80 million Kimchi bond in February, and has now expanded the structure further by combining dollar- and yuan-denominated tranches.
The latest Kimchi bond was issued publicly across two tranches: USD 20 million and CNY 440 million, totaling approximately KRW 128.7 billion. The dollar-denominated portion was structured as a one-year note priced at 77 basis points over SOFR, the risk-free benchmark. The yuan-denominated tranche was issued as a two-year bond carrying a 2.09% coupon rate.
Through this dual-currency Kimchi bond, Hyundai Card expects to broaden its funding channels and reduce currency-specific funding risks. In particular, the inclusion of a yuan-denominated tranche is expected to help the company reach a wider base of Chinese investors, who have recently shown increasing interest in Korea's domestic bond market. It also allows Hyundai Card to tap into new investor demand beyond its existing dollar-centered foreign currency funding structure.
Kimchi bonds are foreign currency-denominated bonds issued in Korea. For Korean companies, they provide a way to raise foreign currency funding without directly accessing offshore bond markets. Following regulatory easing by Korean foreign exchange authorities aimed at easing supply-demand imbalances in the foreign exchange market and reducing depreciation pressure on the Korean won, Kimchi bonds have once again attracted attention as a tool for securing foreign currency liquidity while diversifying funding channels. Issuance has recently been increasing, particularly among Korean credit-specialized financial companies and blue-chip corporates.
The latest issuance also qualifies as a Korean green bond under the Korean Green Taxonomy Guidelines. Proceeds will be used to support financial services related to Hyundai Motor Group's eco-friendly mobility businesses, including electric vehicles and fuel cell electric vehicles. Hyundai Card has continued to use ESG bonds as part of its green financing strategy, starting with its KRW 240 billion green bond issuance in 2019, the first by a Korean credit card company. On June 11, the company also issued KRW 160 billion in green bonds.
"Amid heightened volatility in both domestic and global financial markets, the funding environment remains challenging," a Hyundai Card official said. "This dual-currency Kimchi bond issuance is expected to help us expand our investor base and diversify currency-related funding risks. The company will continue to make proactive use of various funding methods to secure stable liquidity and strengthen our funding competitiveness."
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