[Funding] SK Energy Securitizes 124 Billion KRW in Gas Station and Petroleum Agency Accounts Receivable

Bukuk Securities Underwriting · Shinhan Capital Credit Provision
Raising Funds Without Increasing Borrowings

[Asia Economy Reporter Lim Jeong-su] SK Energy has securitized its accounts receivable from gas stations nationwide to raise 124 billion KRW in funds. It is interpreted that the company turned to accounts receivable securitization to secure the necessary funds without increasing its borrowings.

According to the investment banking (IB) industry on the 30th, SK Energy raised 124 billion KRW by transferring fuel sales accounts receivable from gas stations to a special purpose company (SPC). SK Energy has supply contracts with directly operated gas stations and petroleum dealerships nationwide, and transfers part of the payment receivables to the SPC.

The SPC issued securitized bonds using the acquired accounts receivable from SK Energy as collateral to prepare the payment to SK Energy. Through this transaction, SK Energy was able to proactively secure cash liquidity before the accounts receivable payment date.

Bookook Securities led this accounts receivable securitization. During the securitization process, Shinhan Capital provided credit facilities to the SPC. If the SPC faces difficulties repaying short-term bonds due to lack of funds, liquidity support of up to 80 billion KRW will be provided.

It is interpreted that SK Energy chose accounts receivable securitization to raise funds without increasing borrowings. An IB industry official said, "SK Energy’s borrowings have increased significantly due to poor performance caused by COVID-19, working capital needs, large-scale investments, and dividends," adding, "Therefore, it seems they are refraining from additional borrowing."

As of the end of June this year, SK Energy’s net borrowings increased to 2.7 trillion KRW. Over the past three years, profitability has declined due to shrinking refining margins, and borrowings increased as the company executed large-scale investments, including 1.2 trillion KRW invested in the Ulsan Vacuum Residue Desulfurization Unit (VRDS). Last year, the company recorded a loss approaching 2 trillion KRW due to COVID-19, further worsening its financial figures.

With large-scale investments now completed and performance showing signs of recovery this year, SK Energy has begun reducing borrowings. Since issuing 500 billion KRW in corporate bonds in April this year, the company has not issued additional bonds. SK Energy recently announced that it has mostly repaid the large amount of short-term commercial paper (CP) it issued due to deteriorated refining margins caused by COVID-19.

A credit rating agency official said, "SK Energy is recovering profitability, but the improvement is not significant, and working capital burdens are increasing due to rising oil prices," adding, "It will be difficult to expect a significant financial improvement in the short term."

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