[Funding] Woori and Hyundai Card Secure 150 Billion KRW Through Purchase Card Securitization for LG Chem and LGD

[Asia Economy Reporter Lim Jeong-su] Woori Card and Hyundai Card have consecutively raised operating funds by securitizing the purchase-only card receivables of major LG Group affiliates such as LG Chem and LG Display. This method involves converting the card receivables used by LG Chem and LG Display to purchase raw materials or goods into cash.

Securitization of purchase-only cards is utilized as a key means for card companies to raise operating funds without increasing their leverage ratio.

According to the investment banking (IB) industry on the 14th, Woori Card raised about 102 billion KRW by securitizing LG Chem’s purchase-only card receivables under the management of Bookook Securities. LG Chem’s card receivables are transferred to a special purpose company (SPC), which then issues securitized notes backed by the expected card receivables. When LG Chem settles the card payments, the funds are used to repay the notes.

On the same day, Hyundai Card raised approximately 56 billion KRW by securitizing LG Display’s purchase-only card receivables under the management of Hi Investment & Securities. In March, Shinhan Card also securitized LG Display’s card receivables with Korea Investment & Securities as the lead manager, securing about 70 billion KRW in liquidity through this method.

It is known that the card companies plan to use the raised funds for operating capital. While card companies mainly secure operating funds by issuing asset-backed bonds (card bonds), securitization of card receivables is used as a means to secure operating funds while limiting an increase in leverage ratio due to borrowing.

The high repayment stability also makes it easier to attract investors. This is because the debtors of purchase-only cards are mostly high-quality large corporate affiliates such as LG Group and SK Group, resulting in low payment uncertainty. Additionally, highly creditworthy card companies bear collateral responsibility for the receivables, enhancing the stability of the securitized commercial paper (CP).

Corporate purchase-only cards are credit cards used between companies for transactions between purchasing companies and suppliers. They were developed as an alternative to promissory notes to address the side effects arising from the practice of exchanging promissory notes during goods transactions.

An IB industry official said, "Large corporations can adjust the payment dates of accounts payable by utilizing purchase-only cards, so they can also use them for managing operating funds."

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