The “unwritten rule” collapsed by 30% after the call option was not exercised
Bonds from other insurance companies and banks also fell.
The authorities disperse the cycle of issuing corporate bonds
Expert “Solving uncertainty, not control”
The short-term money market crisis triggered by the Legoland incident is spreading to the entire foreign currency liquidity procurement market in the aftermath of Heungkuk Life Insurance’s “non-execution of dollar-denominated hybrid call options on securities of capital (early repayment) “. Both domestic and foreign investors have stopped ordering foreign currency denominated bond products called Korean Papers, and the price is plummeting as a result.
According to Bloomberg on the 6th, Heungkuk Life Insurance’s $ 100 face value trading price of new equity (permanent bonds) in the foreign currency bond market plunged to $ 72.2 on the 4th. , October 7, 31, the day before Heungkuk Life Insurance announced its intention to forgo the call option, the price fell nearly 30%. It traded at a price close to $ 100 on the market, expecting repayment this month as expected, but the price has dropped as the repayment period has been extended up to 30 years due to this crisis. Meanwhile, the exercise of call options was carried out as if it were an unwritten rule for Korean hybrid equities.
The prices of hybrid equities of other insurance companies and banks also fell. Tongyang Life Hybrid Capital Securities, which matured in September 2025, fell from $ 83.4 to $ 52.4 over the same period, and Woori Bank’s Hybrid Capital Securities, which matured in October 2024, fell from $ 87.5 to $ 77.8. Shinhan Financial Group’s new stock maturing in August next year also fell from $ 96.6 to $ 91.5.
Transactions have practically disappeared. A head of foreign bond management at a securities firm said: “Before Heungkuk Life’s call options were not exercised, even though liquidity for Korean securities was not regular, there were bid and ask prices, but these also disappeared after the call option was abandoned. ” A bond manager at an asset management firm said, “There have been many new types of equity securities this month that have no actual transactions.” As market confidence in Korean products is shattered and trade freezes, only low-priced sales are coming out, “he said. Lee Chang-yoon, global director of Standard & Poor’s (S&P), said:” It will also affect the new issuance of new equity securities by Korean insurance companies and their supply plans through refinancing. “At the same time, on the market, KEPCO, a government-backed AAA-grade super-flow bond, suffered the humiliation of being offered for the first time in three years. last month, the company attempted to issue 400 billion won in corporate bonds, but issued only 280 billion won in 340 billion won offers. On the 20th, only 170 billion won received. uto an offer of 300 billion won, which is less than the target amount (400 billion won), and on the 25th only 80 billion won of the 200 billion won were issued. On the 26th, out of a target of 200 billion won, only 80 billion won received offers, so only 60 billion won were issued. KEPCO said: “As the financial market was severely restricted due to the Legoland crash, investor sentiment contracted and the bond issue was not met.”
Meanwhile, the 1st, 3rd and 4th, the Financial Services Commission and the Financial Supervisory Service met with financial companies such as banks, insurance companies, credit cards and corporations to hold an inspection meeting of the market and to adjust the bond issuance cycle so that they do not overlap each other to prevent a money market crisis.
Ha Jun-kyung, a professor of economics at Hanyang University, said: “It will not be easy for the authorities to control corporate bonds issued according to the needs of companies, as desired.
The reporter Kang Shin
