Kookmin’s successful sale on Wednesday of the first covered bond to be launched under dedicated South Korean legislation has diversified its investor base, according to a senior representative at the bank, who also cited the benefit of cheaper funding.

Kookmin Bank’s $500m (Eu437m, Won563.38bn) 144A/Reg S five year issue inaugurated the South Korean legislative framework, which took effect last year, with the only previous covered bond issuance from the jurisdiction launched on a contractual basis or by state-owned Korea Housing Finance Corporation under legislation specific to the institution.

The Kookmin representative said the bank had launched its pioneering $8bn programme to achieve three important goals.

“First, we wanted to access to a new funding opportunity to raise more capital at low cost,” he said. “Secondly, we wanted to diversity our funding sources.

“Lastly, we wanted to diversify into a developed market investor base.”

Leads BNP Paribas, Citi and Société Générale priced the new issue at 90bp over mid-swaps, closing the books at around $800m from 32 accounts. They had launched the deal with initial price thoughts of the low 90s area, before setting guidance of the 90bp area.

The Kookmin representative said that the deal was a success.

“We ended up raising funding much cheaper than our competitors in the Korean financial industry,” he said. “Our deal was priced 90bp over mid-swaps, while our competitors’ senior unsecured bonds were trading at 110bp-115bp at the point of the pricing.

“In addition, we will be able to tap into a new developed market investor pool, which is evidenced by the geographical split of the deal.”

US investors bought 51% of the bond, with EMEA investors taking 38% and Asia 11%. Funds and asset managers were allocated 40%, central banks and official institutions 32%, banks 19% and pension funds, and insurance companies 9%.

The Kookmin representative added that the bank’s approach to future bond issuance depends on the funding demands of the bank.

“However, we plan to issue covered bonds periodically,” he said. “Our senior management also expects us to issue as often as possible if the market conditions allow.

“And we are planning to issue covered bonds periodically to provide liquidity for our existing covered bond investors.”