[Corporate Financing] Hyundai Motor Group Increases Corporate Bond Issuance Due to COVID-19 Crisis

Expected to Approach 25 Trillion Won by April
All In on Securing Liquidity for Refinancing and Operating Funds Use

[Asia Economy Reporter Lim Jeong-su] Hyundai Motor Group affiliates have been consecutively issuing large-scale corporate bonds this year. They rank second in bond issuance volume after SK Group, which issues the largest amount of corporate bonds domestically every year. It is understood that they are securing liquidity to obtain operating and refinancing funds amid worsening cash flow due to the COVID-19 pandemic.

According to the investment banking (IB) industry on the 21st, Hyundai Motor Group's corporate bond issuance has exceeded 2 trillion won this year. If Hyundai Motor (credit rating AA+) issues corporate bonds soon, the bond issuance volume is expected to reach 2.5 trillion won. This approaches the 2.451 trillion won worth of corporate bonds issued throughout last year. It is closely following SK Group, which has issued 2.54 trillion won worth of bonds so far this year.

Among the affiliates, Kia Motors (AA0) issued the largest amount of corporate bonds at 600 billion won. Kia Motors attracted purchase orders exceeding twice the target amount, totaling 720 billion won, in the demand forecast for the issuance of 3-year corporate bonds. Hyundai Steel (AA0) issued 550 billion won worth of corporate bonds in January before the COVID-19 situation intensified. Hyundai Construction (AA-) and Hyundai Wia (AA-) issued corporate bonds in February, raising 300 billion won and 250 billion won respectively.

Hyundai Glovis (AA0) and Hyundai Autron (A0), which had never issued public corporate bonds before, also issued bonds worth 300 billion won and 80 billion won in February and April respectively. All successfully increased issuance due to investment demand exceeding the planned amount. Hyundai Motor, the group's flagship company, is planning to issue corporate bonds for the first time in four years since 2016. Although the issuance size is 300 billion won, there is a high possibility of increasing the fundraising scale to 500 billion to 600 billion won depending on the demand forecast results.

Hyundai Motor Group affiliates mainly entered the corporate bond market to secure operating funds and refinancing funds. Kia Motors plans to repay corporate bonds maturing in June with part of the raised funds, and use the remainder to settle purchase debts to affiliate parts companies such as Hyundai Mobis, Hyundai Wia, Hyundai Transys, and Hyundai Kefico. Hyundai Motor is also known to plan to use the funds raised through bond issuance for operating purposes as it currently has no urgent borrowings to repay.

Hyundai Steel, which recorded its first deficit since establishment in the fourth quarter of last year, has lost the chance to return to profitability this year due to the COVID-19 crisis. It has started selling its office building in Jamwon-dong, Seoul, and its steel pipe business division, but its self-rescue plans are not progressing quickly. Hyundai Glovis is also inevitably facing deteriorating performance due to a decrease in automobile export volumes.

An IB industry official analyzed, "Due to the spread of COVID-19, Hyundai Motor Group's global automobile sales, centered on the US and China, are expected to drop significantly," adding, "A large-scale performance deterioration in the first half of the year is inevitable." The official predicted, "Accordingly, the need to secure liquidity has increased not only for Hyundai Motor and Kia Motors, the core of the group, but also for parts affiliates," and "The volume of market-based fundraising such as corporate bond issuance will increase significantly for the time being."

This content was produced with the assistance of AI translation services.