[Funding] SK Ecoplant Issues 100 Billion Won Private Bonds... Expanding Borrowing Amid Consecutive M&As

[Asia Economy Reporter Lim Jeong-su] SK Eco Plant, formerly known as SK Construction, has issued 100 billion KRW worth of private bonds. Following the issuance of 300 billion KRW in public bonds in July, the company has issued bonds totaling 400 billion KRW in the second half of the year alone. Financial burdens are increasing as it continues to acquire environmental-related companies specializing in water treatment and waste management through M&A.

According to the investment banking (IB) industry on the 17th, SK Eco Plant recently issued private bonds worth 100 billion KRW. The maturity is 4 years with an interest rate of 3.06%. It is known that SK Securities, which separated from the SK Group affiliates, underwrote the bonds and sold them to investors.

SK Eco Plant has been increasing bond issuance this year. In July, it issued 300 billion KRW in public bonds. Initially planning to issue 150 billion KRW, the amount was increased to 300 billion KRW due to strong demand from institutional investors during the book-building process, raising additional funds.

Earlier in February, the company also issued public bonds raising 300 billion KRW. At that time, it planned to raise 150 billion KRW, but due to investment demand reaching 1.21 trillion KRW, the issuance amount was increased to 300 billion KRW.

The reason SK Eco Plant is expanding its fundraising is due to increased investments in environmental businesses. Last year, SK Eco Plant acquired the waste water treatment company EMC Holdings (now Korea Facilities Management Corporation) for about 1 trillion KRW. It also invested approximately 600 billion KRW in acquiring waste-related environmental companies such as Clenco, Daewon Green Energy, Saehan Environment, DDS, Green Environmental Technology, Imedion, and Urban Environment.

In this process, SK Eco Plant raised funds through multiple corporate bond issuances and acquisition financing. Additionally, it raised about 250 billion KRW by selling shares of TSK Corporation and the Gangnam Housing Culture Center site, and sold SK TNS shares for 290 billion KRW.

Despite the increase in borrowings, the cash-generating ability of the core construction and civil engineering sectors has not significantly improved, leading to increased financial burdens. Net borrowings (total borrowings minus cash equivalents), which stood at about 385 billion KRW at the end of 2019, rose to 1.135 trillion KRW in the first quarter of this year.

During the same period, the debt ratio also increased from 266% to over 400%. The rise in debt ratio was due to a decrease in equity capital caused by increased borrowings and losses from overseas operations.

An IB industry official said, "The trend of increasing external financing continues in the second half of the year, expanding financial burdens," and added, "If cash generation in the environmental business does not improve, it could become a burden for future fundraising."

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