SK on is actively tapping the year-end financial market to secure investment funds for its battery ventures. Following its debut in the public offering corporate bond market earlier this year, the company is now actively utilizing the short-term corporate paper (CP) market for fundraising.
According to the securities information portal of the Korea Securities Depository (KSD) on Nov. 10, SK on has issued a total of 100 billion won (US$75.41 million) in commercial paper (CP) since last month. In the current month, it has raised 30 billion won by issuing long-term CP with maturities exceeding 300 days.
It is interpreted that SK on is utilizing the CP market as the need for aggressive investment capital increases. The company was established through the physical division of SK Innovation’s battery business division on Oct. 1, 2021. Given the nature of the battery industry, which requires proactive expansion of production capacity through significant facility investments, it is analyzed that it is putting effort into securing investment funds.
Some analysts suggest that SK on is using CP to raise the amount it couldn’t secure in the corporate bond market debut last month. On Oct. 31, the company issued a total of 200 billion won, including 65 billion won for a 2-year maturity and 135 billion won for a 3-year maturity. It’s worth noting that this is SK on’s first foray into raising funds in the domestic corporate bond market.
Originally, SK on had planned to raise up to 500 billion won to cover the construction costs of its electric vehicle battery production plant. Due to a lack of interest from investors, however, the company reduced the issuance size to a maximum of 400 billion won. Subsequently, it encountered challenges in generating investment demand, with some of the 2-year maturity bonds remaining unsold according to the demand forecast of institutional investors. In the end, SK on only managed to raise a total of 200 billion won, resulting in a decrease of approximately 100 billion to 300 billion won in investment funds compared to the initial expectations.
Diversifying its fundraising sources has also been considered. In addition to corporate bonds, which are a prominent fundraising method, SK on plans to secure various fundraising channels such as CP, foreign currency bonds, and loans in advance. In May, the company raised US$900 million (1.19 trillion won) in the foreign currency bond market with the guarantee of KB Kookmin Bank. This month, SK on has arranged for financial support of up to 1 trillion won (US$754.15 million) for three years through NH Nonghyup Bank using methods like corporate loans and payment guarantees.
The increasing level of borrowing has become a concern as it is negatively impacting SK on’s financial indicators. As of the end of June, SK on’s debt to equity ratio is at 183.4 percent, and its net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio stands at 33.6 percent.