Heungkuk to exercise call option for hybrid bonds

SEOUL– South Korean insurer Heungkuk Life Insurance Co. said Monday it plans to exercise a call option for long-term hybrid bonds issued in 2017, reversing its previous decision to delay the buy-back.

“We apologize for causing turmoil in the financial market with our previous decision,” Heungkuk Life Insurance said in a statement. “We plan to continue to spare no efforts to stabilize the market and protect customers.”

The company earlier decided to delay exercising a Nov. 9 call option for hybrid bonds worth US$500 million issued in 2017, citing unfavorable market conditions stemming mainly from U.S. monetary tightening.

Hybrid bonds, which combine debt and equity features, usually come due in 30 years, but a call option gives the issuer the right of termination before maturity.

As the call option date is virtually deemed to be the maturity date of hybrid bonds, Heungkuk’s previous announcement hurt investor sentiment on foreign currency-denominated securities sold by South Korean financial institutions, dubbed “Korean papers.”

Analysts have voiced concerns that Heungkuk’s postponement in redemption could worsen overseas financing conditions for South Korean firms, which have already been hurt amid the looming fears of a recession.

Source: Yonhap News Agency

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