Thursday, February 20, 2020
Companies Actively Issue Bonds to Prepare for Economic Slowdown
Ordinary Corporate Bond Issuance Hits Six-year High in Jan.
Companies Actively Issue Bonds to Prepare for Economic Slowdown
  • By Yoon Young-sil
  • March 4, 2019, 10:01
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Corporate bond issuance totaled  in January, reaching a record high in six years.

Issuane of ordinary corporate bonds xceeded 5 trillion won (US$4.45 billion) in January, reaching a record high in six years. Businesses actively sought to secure funds to brace for an economic slowdown.

The Financial Supervisory Service (FSS) announced on Feb. 28 that the amount of corporate bonds issued in January this year came to 13.31 trillion won (US$11.85 billion), up 55.8 percent from the previous month. In particular, the amount of corporate bonds issued by ordinary companies showed a whopping 1,172.4 percent increase to 5.85 trillion won (US$5.21 billion). This was the largest monthly ordinary bond issuance figure in six years and three months after the 6.44 trillion won (US$5.73 billion) recorded in October 2012. The biggest reason for bond issuance was to secure operating funds (3.23 trillion won or US$2.87 billion), followed by refinancing (2.52 trillion won or US$2.24 billion).

By maturity, long-term bonds with more than five years amounted to 3.80 trillion won (US$3.38 billion), while medium-term bonds totaled 2.05 trillion won (US$1.83 billion). By rating, bonds with over AA ratings accounted for 81.2 percent of the total with 4.75 trillion won (US$4.23 billion).

By company, Shinhan Bank topped the list with 1.50 trillion won (US$1.34 billion), followed by CJ CheilJedang and Hyundai Steel with 700 billion won (US$622.78 million) each, SK Incheon Petrochem with 600 billion won (US$533.81 million), Hana Bank with 598.20 billion won (US$532.21 million) and Mirae Asset Daewoo with 500 billion won (US$444.84 million).

An official from the FSS said, “The issuance of corporate bonds surged as three factors coincided – companies’ move to raise financing to tide over the ongoing economic slowdown, the decrease in market interest rates and the resumption of fund operation by institutional investors.”

However, the amount of stocks issued by companies stood at 246 billion won (US$218.86 million), down 61.2 percent from the previous month, while that of initial public offering (IPO) dropped by 59.3 percent to 128.90 billion won (US$114.68 million).