Issues Bonds for the 1st Time to Finance Clinical Trials
Chong Kun Dang has successfully completed its corporate bond market debut. The pharmaceutical company attracted investors to its first bond issue by offering higher interest rates compared to the company's credit rating.
Chong Kun Dang planned to issue 100 billion worth of bonds, but subscriptions amounted to 390 billion won in a demand forecast conducted on Sept. 2.
Subscriptions amounted to 250 billion won for three-year papers worth 80 billion won and 140 billion won for five-year papers worth 20 billion won. The special purpose vehicle (SPV) also bought 30 billion won worth of the bonds.
This is the first public bond issuance by Chong Kun Dang. It attracted investors with high coupon rates. Currently, Chong Kun Dang's credit ratings are AA- (stable) and A+ (positive). However, the desired interest rate band it offered was the average interest rate of corporate bonds with A credit ratings. Investors expected a rise in the price of the company’s corporate bonds in the future.
As buying orders poured in, Chong Kun Dang lowered the interest rates. In the case of the three-year paper, the interest rate was set at 1.92 percent, 7bps lower than the 1.99 percent presented by the company. For the five-year bonds, the coupon rate was set at 2.22 percent, 36bps lower than the originally presented 2.58 percent.
As of the first quarter, Chong Kun Dang's debt ratio stood at 71.5 percent and its dependence on net borrowings was -0.8 percent, which means that the company has been operating without reliance on borrowed money.
Chong Kun Dang started to raise operational funds as it needed to finance large-scale clinical trials of Nafabelltan (a treatment for COVID-19), analysts say. With the funds from the issuance of corporate bonds, Chong Kun Dang will invest 25 billion won in the clinical trials of Nafabelltan, 43.2 billion won in the clinical trials of a dual anti-cancer antibody (CKD-702) and 20 billion won in R&D activities for an open innovation new drug platform.