[Funding] Credit Rating Improvement Targets, First Corporate Bond Issuance This Year

[Asia Economy Reporter Lim Jeong-su] Food company Daesang is set to issue its first corporate bonds of the year. With market interest rates falling and its credit rating having risen last year, it is expected to raise funds at the lowest interest rate ever.

According to the investment banking (IB) industry on the 17th, Daesang plans to issue corporate bonds worth around 150 billion KRW, appointing KB Securities and Mirae Asset Daewoo as lead managers. It will soon submit a securities registration statement and begin soliciting institutional investors through a demand forecast.

Daesang's credit rating was upgraded from A+ to AA- last year. This was due to improved performance driven by increased food demand amid the COVID-19 pandemic, as well as efforts to improve finances through the sale of non-core assets.

As of the end of the third quarter last year, consolidated cumulative sales reached 2.37 trillion KRW, a 6.04% increase compared to the same period in 2019. Profitability also improved, with the EBITDA margin exceeding 10%. A securities analyst explained, "The performance of the materials sector, including starch and lysine, has steadily improved, and the food sector's performance, centered on home meal replacements (HMR), saw significant growth last year."

Borrowings have also been steadily decreasing. Daesang's borrowings once exceeded 1 trillion KRW in 2017 due to the acquisition of the lysine business, expansion of its Southeast Asian food business, and land purchase for the Magok Research Center. Since then, improved cash flow from strong performance and financial restructuring efforts such as the sale of the Sinseoldong office building have reduced borrowings to approximately 868 billion KRW as of the end of the third quarter last year.

With improved creditworthiness and falling government bond yields, Daesang is expected to issue corporate bonds at the lowest interest rate ever. The private bond rating agency's evaluation rate (market average rate) for Daesang's 3-year maturity corporate bonds fell to 1.338% as of the 15th.

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