Kimchi bond
Encyclopedia
A Kimchi bond is a non-won
South Korean won
The won is the currency of South Korea. A single won is divided into 100 jeon, the monetary subunit. The jeon is no longer used for everyday transactions, and appears only in foreign exchange rates...

-denominated bond issued in the South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...

n market. The name refers to kimchi
Kimchi
Kimchi , also spelled gimchi, kimchee, or kim chee, is a traditional fermented Korean dish made of vegetables with varied seasonings. There are hundreds of varieties of kimchi made with a main vegetable ingredient such as napa cabbage, radish, green onions or cucumber. It is the most common...

, a Korean side dish. Woori Bank
Woori Bank
Woori Bank is a bank headquartered in Seoul, Korea. The bank changed its name in 2002, and includes the former Commercial Bank of Korea, Hanil Bank, and Peace Bank. It was known from 1999 through 2002 as Hanvit Bank...

, which is credited with coining the term, defines it as solely referring to bonds from foreign issuers, a definition echoed by the Ministry of Finance and Economy
Ministry of Finance and Economy (South Korea)
The Ministry of Strategy & Finance or MOSF oversees the financial policies of the South Korean government. It publishes a monthly report on the national economy, known as the "Green Book." The current minister is Yoon Jeung-Hyun....

. However, in practise, the term is also used to refer to non-won-denominated bond issuance by domestic entities. Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...

 credits itself as having executed the first kimchi bond transaction, a US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

100 million two-year floating rate note
Floating rate note
Floating rate notes are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e. they pay out interest every three months, though counter...

 sold by South Korean company SK Global, but the first foreign company to sell non-won-denominated bonds in the South Korean market was Bear Stearns
Bear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...

. Although foreign firms had long been permitted to issue won-denominated bonds, typically referred to as Arirang bond
Arirang bond
An Arirang bond is a won-denominated bond issued by a foreign entity in South Korea. The name refers to Arirang, a Korean folk song. The market for Arirang bonds is extremely small, constituting less than 0.2% of corporate bond issuance in South Korea. The Asian Development Bank was the first to...

s, permission for them to issue foreign currency-denominated bonds was slower in coming. Permission was finally granted due to the strength of the won in 2005.
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