[Funding] Hanwha Energy Secures 50 Billion Won Securitized Loan for Debt Repayment

Panoramic View of Hanwha Energy's Solar Power Plant in Texas, USA

[Asia Economy Reporter Lim Jeong-su] Hanwha Energy has raised 50 billion KRW through a loan securitization method. It is reported that the funds will be used to repay maturing corporate bonds.

According to the investment banking (IB) industry on the 31st, Hanwha Energy recently borrowed 50 billion KRW from a special purpose company (SPC) established under the lead of Hana Bank. The loan term is 3 years with a lump-sum repayment at maturity. However, if Hanwha Energy bears all costs related to interest rate swaps (IRS) for interest rate hedging and expenses incurred from loan securitization, early repayment before maturity is possible.

If Hanwha Energy’s effective credit rating falls below A-, it may lose the benefit of the term. Hanwha Energy’s credit rating is AA-, which is excellent, but the rating outlook is negative, increasing the likelihood of a downgrade to A+. There is a 3-notch buffer until the trigger for loss of term benefit.

The raised funds are expected to be used for loan repayment. Hanwha Energy’s 3-year maturity corporate bonds worth 130 billion KRW, issued in February 2018, will mature on the 1st of this month.

Hanwha Energy has not issued public corporate bonds since February 2019. It is reported that due to deteriorating profitability and increasing financial burdens, the company is reluctant to enter the public market.

Hanwha Energy’s consolidated operating profit, which once exceeded 200 billion KRW, recently plunged below 100 billion KRW due to declining profitability in the collective energy business and a turnaround to losses in overseas solar power projects. Borrowings surged from 773 billion KRW in 2016 to 2.677 trillion KRW as of the end of the third quarter last year, driven by expanded investments in solar power and other areas.

Short-term borrowings have also intensified. Among total borrowings, short-term borrowings and current portion of long-term debt that must be repaid or refinanced within one year exceed 1.2 trillion KRW. An IB industry official commented, "They are partially improving their financial structure by recently selling overseas solar power plants," but added, "However, with large-scale investments planned, it is uncertain whether the financial improvement trend can continue."

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