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금융

Working Paper

한국을 위한 새로운 자금원으로서의 양키 본드

페이스북
커버이미지
  • 저자 Mansoo Kang
  • 발행일 1989/01/01
  • 시리즈 번호 8901
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요약 Korea is an export-driven and highly-indebted economy. As
a result, Korea is confronted with increasing trade barriers in its
overseas markets and strong pressure on opening-up its
domestic market even though Korea had a huge external debt of
about 45 billion US dollars in 1986. Domestic private corporations
are also highly indebted and even more, their financial costs are
very high compared with Korea's major trading partners. The
demand of Korea's labor forces to increase its income share also
has financial implications. These circumstances mean that Korea
simultaneously has the highly-indebted LDC's problem of a high
burden of debt servicing, the NIC's problem of increasing trade
barriers in their overseas market, and the industrialized country's
problem of labor disputes and thereby wage increases.

In the future, Korea inevitably needs new competitive money
with lower-rates but longer maturity not only for further
industrialization, but also for improving its competitiveness in
domestic and overseas markets. To obtain more competitive
money, Korea must turn to the international financial markets
where large amounts of lower-rate, longer-maturity monies are
actively traded. Among the international financial markets, Korea
has never borrowed form the Yankee bond market, although it
has issued bonds in the Euromarket in the past.

The Yankee bond market is a very large and liquid capital
market. The volume of Yankee bonds was $6,044 million in
1986. The major borrowers are OECD countries and international
development organizations. Private corporate issuers and NICs
find the market less open due to difficult disclosure requirements
and low credit standing. A registration statement which contains
a prospectus must be filed with the SEC in the case of a public
offering. The SEC undertakes a review of the registration
statement which is the disclosure document about issuers, and
then issues comments upon the disclosures. After a review and
comments, the SEC gives the timing of effectiveness of the
registration. An acceptable credit rating from the two major
rating agencies, Moody's and Standard & Poor's, is essential for
successful issuing. Market acceptance, interest rates and
underwriting commissions are normally determined by this
rating.

After the effective registration with the SEC, bonds are
offered to the investment public usually by an investment bank
or a syndicate of investment banks. The investment banks
underwrite the bonds and resell them to investors through bond
dealers. After issuing bonds, periodic reporting requirements
must be fulfilled by the filing of annual and form-time-to time
reports.

The Yankee bond market is open to all countries and
corporations. The door to the Yankee market is not closed to
Korea, even though it has not issued any bonds in the market.
The door is simply narrow and small.

Korea has already entered the international capital market
and accumulated creditworthiness without any problem in debt
service. The credit rating of Korea will probably be graded up
to the double "A" after the peaceful transition of the
government, successful holding of the 24th Olympiad in 1988,
and the successful implementation of Korea's 6th 5-Year
Economic and Social Development Plan. Also, the accounting
principles of Korea are basically adopted form the U.S. standards
and therefore no significant problems in disclosure of sufficient
information exist.

There are numerous advantages that Korea can obtain by
financing through the Yankee market

First, the Yankee bond market is the deepest and the most
capable of absorbing large frequent issues. The market ensures
and availability and flexibility of long-term borrowing second to
none. Well established borrowers can frequently return to the
market without difficulties in timing. The liquidity and depth of
the Yankee bond Market make it easy to raise large amounts of
funds without adversely affecting market prices.

Second, the maturities of the Yankee bonds are very suitable
for long-term fixed financing requirements. The longest
maturities which are available for Korean issuers are 15 years in
the Eurobond market. But twenty or thirty year maturities are
very common in the Yankee market.

Third, the interest rated of the Yankee bonds is quite low
compared with domestic interest rated or bond yields of Korea.
The interest rates of Yankee bonds in 1986 ranged from 7.0% to
9.875%, while the commercial banks prime lending rate and
average corporate bond yields of Korea was 10% and 12.8%
respectively in 1986. Including issuing costs of Eurobonds, the
interest rates of Yankee bonds are not ho호 even though the
nominal coupon rates are high. The fixed rated with longer
terms of 20 to 30 years are extremely advantageous for
large-scale and long-period projects or plants.

The availability of low and fixed rate long-term funds can
be a stimulant for lowering domestic interest rates by decreasing
demands for domestic funds. This could really help reduce
domestic interest rates, which would be indispensable to
reducing financing costs in the future

Fourth, the issuing cost of the Yankee bonds are
substantially low. Underwriting commissions in the Yankee
market range from 0.75% to 1.0% as compared to 1.874% to
2.5% for most Eurobonds. The total cost of issuing a Eurobond
by a government-owned bank of Korea in Swiss francs was
actually 4.05% in 1986. This means that low rates of Eurobonds
are eroded by higher issuing costs.

Finally, although the Yankee bond market is the most
difficult to access, the resulting advantages of successful initial
issues will enhance borrower's credit standing, will reduce the
future borrowing cost and will establish powerful public relations
with the other investors as well as U.S. investors.

In conclusion, Korea needs new money containing lower-rate
but longer-maturity not only for further industrialization but also
for improving its competitiveness in domestic and overseas
markets. While entry by Korea into the Yankee bond is not
guaranteed, prospects are encouraging. Korea's domestic political
situation is becoming more democratic, the 24th Olympiad will
be held in 1988, and the 6th 5-Year Economic and Social
Development Plan of Korea can be successfully implemented
between 1987 and 1991. The successful access of Korea to the
Yankee bond market will provide Korea with a new financing
source of low-cost, large-scale and long-maturity funds.
Moreover, a Yankee bond issue will enhance Korea's credit
standing in the international capital markets.
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