|
|
 Primary
Market |
Bonds are classified largely into three categories
according to the issuer！corporate bonds, government
bonds and special public bonds. The latter
two are typically referred to as public bonds.
|
|
By year-end 2004, the total outstanding value
of listed bonds reached 661.3 trillion
won. |
|
Public bonds accounted for 83 percent and
corporate bonds 17 percent. The sharp increase
in the number of bond issuances has helped
financial restructuring in the financial,
public and corporate sectors. |
| Government
Bonds |
|
The Ministry of Strategy and Finance (MOSF)
may, with an approval by the National Assembly, issue government
bonds. |
|
Issuance is based on the national account,
national fund or other special accounts specified
under the related laws. |
|
If a bond is issued without any special provisions,
MOSF may set the terms and conditions of issuance.
|
|
The three major government bonds
are available: |
，
Treasury bonds
， National housing bonds
， Foreign exchange stabilization bonds
|
|
In January 1999, public investors were permitted
to participate in underwriting government
bonds through primary market auctions. |
|
Furthermore, the government replaced the bond
market document bidding system with an electronic
bidding system operating via the Bank of Korea
(BOK), which effectively linked the central
bank with financial institutions. |
|
Primary dealers, having a near monopoly in
primary market underwriting, were introduced
to boost the bond market. In the secondary
market, however, these dealers were to act
as market-makers. |
|
Primary dealers were selected based on their
past trading performance. |
，
As of February 2004, twenty primary dealers！ten
securities firms and ten banks！are in operation.
|
|
Furthermore, the government has now allowed
inter-dealer brokers to be established, mediating
transactions among bond dealers, as well as
dealer broker companies and securities firms
that specialize in bond trading. |
，
As of February 2004, there are two inter-dealer
brokers operating in the industry:
Korea Money Broker Corporation and
Korea Inter Dealer Broker Corporation. |
| Special
Public Bonds |
|
Special public bonds are issued by designated
public entities, e.g., municipal authorities,
government-invested corporations and financial
institutions. |
|
The major bonds outstanding are as follows:
|
， Seoul Metropolitan
Rapid Transit Corporation Bonds
， Regional Development Bonds
， Monetary Stabilization Bonds
， Financial Debentures
， Korea Electric Power Corporation Bonds |
| Corporate
Bonds |
|
Corporate bonds are issued by private corporations
established under the Commercial Code. |
|
Corporate bonds may be issued through public
offerings, the maximum amount being four times
the net assets most recently recorded by the
issuer. |
|
They are classified according to whether there
exists a guarantee, collateral or variability
of special rights. |
|
Several categories of corporate bonds are
offered in the primary market, as follows:
|
，
Guaranteed and non-guaranteed bonds
， Corporate mortgage bonds
， Long-term and short-term maturity bonds
， Fixed-rate and floating-rate bonds
， Bonds with special rights : convertible
bonds (CBs), bonds with warrant (BWs),
exchangeable bonds (EBs), participation
bonds (PBs), and bonds with embedded options
(BOs) |
| Bond
Offerings |
| <Government
Bonds> |
|
Government bonds are issued under the nation's
Constitution and the Budget and Accounting
Act. |
|
The procedure for the issuance is: |
，
Ministries submit their government bond issuance
plan to MOFE
， If confirmed, MOFE refers the plan to the
State Council
， State Council presents plan to the President
of Korea
， After parliamentary approval, MOFE issues
the bonds
|
| <Corporate
Bonds> |
|
Corporate bonds are issued after approval
from the corporation's board of directors. |
|
The issuer designates a securities firm to
be the lead manager, who in turn forms an
underwriting syndicate with other securities
firms, investment trust companies, merchant
banks and commercial banks. |
| <Non-guaranteed
Corporate Bond> |
|
The procedure for non-guaranteed corporate
bond issuance is as follows: |
， Corporation
must be registered with FSC
， Corporation must designate a lead manager
， Corporation must have the board's resolution
to issue bonds
， Corporation must have two credit agencies
to evaluate its credit ratings
， Corporation and lead manager checks shareholder
list with custodian
， Corporation contracts a lead manager for
firm-commitment underwriting
， Lead manager may organize a syndicate and
a subscription agent group
， Corporation submits a securities report
and preliminary prospectus to FSC
， Lead manager publicizes its bond offering
in local daily newspapers
， Subscription of and payment for the issues
are made
， Corporation informs KSD of the bond issuance
details
， Corporation reports to FSC the issuing conditions
and results |
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