Posted September. 13, 2008 08:57,
The issuance of foreign exchange equalization bonds worth one billion dollars has been delayed, the Strategy and Finance Ministry said yesterday.
We negotiated with investors in New York over price and interest rates, but failed to reach an agreement due to the global financial market slowdown," the ministry said. "So the issuance will be delayed until the market gets better.
Shin Je-yoon, international business director at the ministry, said, The investment roadshows Monday and Tuesday in New York were thronged with investors who were fully informed that the Korean economy is robust. But they asked for higher rates citing dwindling liquidity in New Yorks stock market and high interest rates.
We dont need to accept unfavorable conditions. The ministry has considered that added rates on foreign exchange equalization bonds can serve as a standard rate when Korean companies and financial institutions borrow foreign funds.
Private and state-owned corporations are reportedly preparing the issuance of foreign bonds worth 10 billion dollars.
The ministry said the world financial market is suffering from a global credit crunch due to the looming collapse of Lehman Brothers, the fourth-largest U.S. investment bank.
In addition, rumors of North Korean leader Kim Jong Ils failing health and Pyongyangs resumption of nuclear activity have also worsened conditions for the issuance.
The ministry initially expected an annual additional rate of 1.8 percent to be added to U.S. government bond rates, and planned to stand firm at two percent. Key foreign investors, however, demanded more than two percent, citing a changed situation.
The purpose of the issuance is not to meet an urgent need for liquidity, but to quell the groundless rumor of a September financial crisis. Over that time, however, the rumor died down, said Choi Jong-gu, international finance director of the ministry.
Given our economys fundamentals, we dont have to overdo it.
Shin said, We will observe the interests of foreign investors through Goldman Sachs and HSBC, which will issue the bonds on behalf of the government. When the situation improves, we will issue the bonds and forgo additional road shows.