Korea Housing Finance Corporation is planning an investor roadshow to promote a potential $500m deal and a KHFC official said that it sees advantages in retaining an idiosyncratic format it uses rather than issuing under recently-inaugurated dedicated South Korean covered bond legislation.

As reported last month, BNP Paribas, Société Générale and Standard Chartered are working with KHFC on the planned $500m (Eu453m, Won566bn) deal, which was officially announced yesterday (Wednesday).

Kookmin Bank, which had previously issued covered bonds on a contractual basis, on 14 October inaugurated a dedicated South Korean covered bond law that came into effect last year, selling a $500m five year benchmark at 90bp over mid-swaps.

However, KHFC, despite being able to issue under the new legislation, is continuing to issue under legislation specific to the institution, as it has done so since debuting in 2010.

“KHFC could also issue under the Korea Covered Bond Act,” an official at KHFC told The CBR. “However, in order to provide a consistent nature of our covered bonds for investors, we decided to keep it unchanged.

“Moreover, it is our advantage to issue through our own KHFC Act, which differentiates our bonds from other potential commercial bank covered bonds. KHFC is a government controlled policy arm for the nation’s housing finance business, and it will provide a sense of inherency on our covered bonds based on the KHFC Act.”

Moody’s assigned a provisional Aa1 rating to the issue today (Thursday) and cited as a factor in its analysis: “The KHFC Act regarding the issuance of ‘mortgage-backed bonds’, as defined in the Act, which provides for the separation of the cover pool from the insolvency estate of KHFC. The covered bond transaction is designed to comply with the provisions of the KHFC Act.”

KHFC’s covered bond issuance is backed by mortgages originated by South Korea’s commercial banks, representing a pooling model. However, the cover pool for the latest transaction – with each KHFC covered bond having a distinct cover pool – initially comprises only mortgages acquired from Kookmin.