The Elusive North Korean Bonds That Few Know How to Find

Hedge fund manager Kyle Shin has been trying to get his hands on rarely traded North Korean debt that went into default more than three decades ago. Shin, whose Gen2 Partners in Hong Kong runs a $720 million hedge fund, believes the bonds are trading at about 20¢ to 30¢ on the dollar—which could mean a windfall for anyone holding them when and if a peace deal with the North comes to fruition. “If we’re reunited, it’s highly likely that North Korea will have to come back to the financial markets,” says Shin, a South Korean native. “To come back to the financial markets, they will have to pay off the bonds.”

There’s about $900 million of debt outstanding in principal, or as much as $5 billion depending on how past unpaid interest is calculated, according to Stuart Culverhouse, chief economist of Exotix Partners Ltd., a London-based brokerage specializing in distressed securities. Shin is trying to locate investors who own the bonds and might want to sell. He’s reached out to brokers such as French bank BNP Paribas SA, which in 1997 helped repackage about half of North Korea’s defaulted commercial bank debt into notes denominated in deutsche marks and Swiss francs. (No luck: BNP told him it has no information on where to buy the bonds.)