Shinhan Financial issues CoCo Bond worth W200b

Shinhan Financial Group, the nation’s largest banking group by assets and profits, said Thursday it began issuing a contingent convertible bond, or CoCo Bond, which combines debt and equity.

Despite its relatively long maturity of 30 years, the bond attracted a number of institutional investors, pushing the group to up the issue limit from 200 billion won ($180 million) to 282 billion won, according to officials.

It offers an interest rate of 4.38 percent (at 190 basis points over a 10-year Treasury) -- the lowest level of spread among local CoCo Bonds that were issued here since the implementation of Basel III.

The bond holds lower priority to subordinated bonds, as it is to be written off in case the issuing organization becomes insolvent during the term.

With the issuance of this new CoCo Bond, the group’s capital adequacy ratio will rise by 0.1 percentage points, according to officials.

“The market has recognized Shinhan’s financial stability, which was proven by the investors’ ardent response to our CoCo Bond,” said the group’s spokesperson.

By Bae Hyun-jung (tellme@heraldcorp.com)