SK Group issued 7.9 trillion won (US$7.03 billion) worth of corporate bonds last year, according to investment banking (IB) industry sources on Feb. 20. The figure represented a record high in the group’s history. It showed a large gap compared with No. 2 Lotte Group with 3.7 trillion won (US$3.29 billion) and No. 3 LG Group with 3.5 trillion won (US$3.15 billion). SK Group also had the largest net corporate bond issuance among the nation’s major conglomerates with 3.3 trillion won (US$2.94 billion).
The volume of corporate bonds issued by major conglomerates grew by 20 percent on-year last year. This was due to high demand for corporate bonds amid a weak trend toward interest rate hikes. Business groups were able to secure liquidity despite growing concerns stemming from a possible global economic slowdown and financial market volatility.
Given the circumstances, SK Group issued a large number of corporate bonds based on its sound fundamentals and high credit rating. The debt ratio of SK Group showed a steady decline since 2015 and dropped to 90 percent at the end of last year from 97 percent at the end of 2017. Its gross debt amounted to 44.6 trillion won (US$39.7 billion) last year, up 4.6 trillion won (US$4.09 billion) from a year earlier, but the rate of dependence on loans fell from 24.7 percent to 23.4 percent thanks to huge profits.
SK Group is expected to continuously increase corporate bond issuance this year. It has already issued more than 1 trillion won (US$890.08 million) worth of corporate bonds this year alone, recording the highest figure among major conglomerates.
Han Kwang-yul, a credit strategy analyst from NH Investment & Securities Co., said, “Based on good fundamentals, SK Group will show a steady increase in liabilities. The group is more likely to use the funds to expand its business from oil refining and semiconductor to other areas such as media and mobility. The fact that the group is diversifying its businesses based on its stable key businesses is a favorable factor for credit investment.”
SK Group also cuts a fine figure in terms of market cap. Financial market research firm FnGuide said that the market cap of SK Group came to 121.45 trillion won (US$108.10 billion) as of Feb. 18, up 13.15 percent from 106.60 trillion won (US$94.88 billion) at the beginning of the year. The group showed the highest increase in market cap among the nation’s top five business groups, except for Samsung Group, which showed a 15.54 percent growth from 366.68 trillion won (US$326.37 billion) to 423.65 trillion won (US$377.08 billion) over the same period.
The Fair Trade Commission surveyed the present state of assets owned by the top 60 business groups as of the end of September last year, and Samsung maintained the number one spot with 418.22 trillion won (US$372.24 billion) of assets, surpassing the 400 trillion won (US$356.03 billion) mark for the first time. Hyundai Motor Group and SK Group followed with 220.60 trillion won (US$196.35 billion) and 213.21 trillion won (US$189.77 billion), respectively. In particular, the assets of Hyundai Motor Group, which struggled with poor performance last year, decreased by 2.06 trillion won (US$1.83 billion), while that of SK Group increased by 23.67 trillion won (US$21.07 billion). Accordingly, the gap between the two groups narrowed to some 7 trillion won (US$6.23 billion). SK Group had a sharp rise in assets as it acquired ADT Caps Co. and AJ Rent-a-Car Co. and SK Hynix Inc. generated the highest ever revenue with the semiconductor boom.
Considering the fact that SK Hynix is creating a new semiconductor cluster, the rankings of No. 2 and No. 3 business groups are highly likely to be reversed at the end of the year, according to some market experts. In addition, LG Group ranked fourth with 130.30 trillion won (US$115.98 billion), followed by Lotte with 117.10 trillion won (US$104.22 billion), POSCO with 82.76 trillion won (US$73.66 billion), Hanwha with 65.45 trillion won (US$58.25 billion), GS with 65.34 trillion won (US$58.16 billion), Nonghyup with 59.43 trillion won (US$52.90 billion) and Hyundai Heavy Industries with 55.87 trillion won (US$49.72 billion), making the top 10 business group list.