Aggressive Debt Issuance
SK Group is continuing to raise funds aggressively by issuing corporate bonds. The group has raised 8,752 billion won through bond issuance so far this year. The amount is estimated to reach 10 trillion won at the end of this year with SK Chemical and SK Siltron about to issue additional corporate bonds worth 150 billion won and 200 billion won, respectively.
Specifically, SK Incheon Petrochem attracted 1.2 trillion won by corporate bond issuance this year and the amount is one trillion won for SK Energy, 980 billion won for SK Hynix, 960 billion won for SK and 800 billion won for SK Telecom. Also, SK E&C, SK Materials, AJ Rent-a-Car and Narae Energy attracted more than one trillion won by the same method.
The subsidiaries have been engaged in aggressive financing since early this year. They have accumulated money for facility investment while repaying their matured loans. With investors flocking to the subsidiaries with high credit ratings, some of them have increased the values of their corporate bonds. This month alone, SK E&C and SK Advanced each increased the size of issuance from 80 billion won to 150 billion won.
This is based on their conversion issues that increased with major corporate bonds’ coupon rates falling below 2 percent due to low interest rates. In addition, insiders are pointing out that SK Group is accumulating financial resources at low costs for M&As in new industries with its main businesses such as semiconductor and oil refining shrinking. SK Siltron, which is about to take over the wafer business unit of Dupont, is going to prepare most of the required fund by issuing corporate bonds this month. SK E&S, which is concentrating on photovoltaic electricity generation, is expanding its business by purchasing shares from American alternative energy companies.
“SK Group has achieved its growth by M&As and it is currently investing more and more in minor subsidiaries in order to find new opportunities,” said a local investment bank, adding, “Although the financing is not burdensome yet with the coupon rates at less than 2 percent, its burden can increase in that most of the bonds are short-term.”