The term kimchi bond refers to an indenture issued in South Korea, in a non-won denomination, by a foreign bank or corporation. Kimchi bonds are issued to raise dollars for settlement with trade partners in the United States.
Foreign corporations that wish to raise funds in South Korea have the option of issuing what are known as kimchi bonds. These bonds are sold by non-domestic entities, including corporations, financial institutions and governments, and are issued in a non-domestic currency. Arirang bonds are also issued by foreign entities in South Korea; however, they are won-denominated securities.
Kimchi bonds are attractive to South Korean investors interested in holding debt that is issued in a non-domestic currency. However, whenever an investor purchases a security that is issued in a foreign currency, they are taking on an exchange rate risk.
Kimchi is a popular traditional South Korean side dish. There are many varieties of kimchi, since it is prepared using seasonal vegetables.