South Korea’s central bank unexpectedly cut the benchmark seven-day repurchase rate to 1.25%, a new record low, to aid indebted companies in their restructuring plans. The South Korean won moved sharply lower.
The decision to cut benchmark rates was projected by only Goldman Sachs of 18 economists surveyed while others saw a reduction in the next couple of months.
South Korea’s sovereign yield dropped to a record low this month after minutes of the May meeting showed a board member called for lower rates while the government and central bank planned to create a KRW 11tn ($9.5bn) fund to facilitate corporate restructuring.
The board’s May minutes showed several members were worried about downside risks from the corporate overhaul such as unemployment and declining investment.
The government’s plans to aid corporate restructuring would support its ailing shipbuilders
who had slashed jobs and were in process of restructuring their debt.
According to sources, Noble Group is planning to raise up to $3bn in bank debt as part of its refinancing plan outlined earlier.
Noble could pay an interest rate of 225 basis points over the U.S. dollar Libor on a $1 billion one-year unsecured loan, more than twice the 85 basis points it paid just a year ago.
Further, Noble’s credit facility of about $2 billion would be backed by trade flows and inventories, with an announcement expected this week.
The number of lead arrangers on the unsecured loan was eight banks, which compared with 15 on a loan last year.
According to sources, Societe Generale, Mitsubishi UFJ Financial Group, ING and HSBC were among the lead arrangers on the transaction.
The debt issuance is part of the company’s Chief Executive Yusuf Alireza’s plan to sell assets, cut business lines and trim debt.