[Corporate Financing] Shinseong Tongsang Increases Investment but Sees 'Short-term Borrowing Up' Due to COVID-19

[Asia Economy Reporter Lim Jeong-su] Shinseong Tongsang, a KOSPI-listed fashion apparel company, is continuing ultra-short-term financing. Although it increased investment to expand its domestic distribution network, the burden of repaying short-term borrowings has grown as the efforts did not translate into performance due to COVID-19 and other factors.

According to the investment banking (IB) industry on the 26th, Shinseong Tongsang recently issued corporate commercial papers (CP) worth a total of 25 billion KRW. 5 billion KRW was for refinancing maturing CPs, making the net issuance amount 20 billion KRW. The 20 billion KRW CPs were issued at a discount with a maturity of six months. Since interest is paid in advance, the actual amount raised is less than 20 billion KRW.

Accordingly, Shinseong Tongsang's CP balance increased to 30 billion KRW. Including electronic short-term bonds (STB), which are similar to CPs, the balance of ultra-short-term marketable financing rose to 45 billion KRW. This is the highest level since the company's establishment. In May and June, the company also raised funds by issuing a total of 26 billion KRW worth of stock-related bonds twice with support from the Korea Credit Guarantee Fund.

Shinseong Tongsang's reliance on ultra-short-term funds is interpreted as due to worsening borrowing conditions. While significantly increasing borrowings during the process of expanding the domestic distribution network amid export sluggishness, the financial situation deteriorated as the efforts did not lead to results due to COVID-19.

As of the end of the first quarter this year, consolidated borrowings approached 423 billion KRW. This increased by about 120 billion KRW in three quarters from 308 billion KRW in June last year. The proportion of short-term borrowings within total borrowings is also gradually increasing. As of the end of the first quarter, short-term borrowings and current portion of long-term debt that must be repaid or refinanced within one year reached 327 billion KRW.

Profitability has rather worsened. Although the annual EBITDA generation scale increased, the burden of depreciation expenses due to large-scale investments, financial costs, and rental expenses increased. As of the end of March this year (June fiscal year-end company, cumulative for three quarters), net profit was 2.3 billion KRW, down to one-fifth of the same period last year.

An IB industry official evaluated, "As performance deterioration is expected in the second half due to COVID-19, market borrowing conditions continue to worsen," adding, "The shortening of borrowings is intensifying as maturing corporate bonds and CPs are being managed with ultra-short-term borrowings."

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