[Funding] Hyundai Samho Heavy Industries Secures 90 Billion Won Private Bonds... Proactively Secures Refinancing Funds Before Interest Rate Hike

[Asia Economy Reporter Lim Jeong-su] Hyundai Samho Heavy Industries has issued a private bond worth 90 billion KRW to repay maturing borrowings. This is interpreted as a preemptive move to secure refinancing funds before the Bank of Korea raises interest rates.

According to the investment banking (IB) industry on the 12th, Hyundai Samho Heavy Industries recently issued a private bond worth 90 billion KRW underwritten by DB Financial Investment. The maturity is 1 year and 6 months, with an issuance interest rate of 2.80%. It is known that DB Financial Investment fully subscribed to the bond and then sold it to institutional investors.

The raised funds are planned to be used for refinancing maturing corporate bonds. Hyundai Samho Heavy Industries must respond to the maturity of private bonds totaling 90 billion KRW, with 30 billion KRW each due on February 17 and 24, and March 10.

Issuing corporate bonds at an interest rate in the 2% range to repay maturing bonds is expected to reduce interest expenses. The corporate bonds previously issued by Hyundai Samho Heavy Industries that are maturing have issuance interest rates ranging from 3.77% to 3.80%. The interest rate on the recently issued private bonds is about 1% lower annually than these.

In particular, the IB industry views Hyundai Samho Heavy Industries’ simultaneous issuance of bonds covering maturities up to March as a measure considering the possibility of interest rate hikes. An industry insider said, "Market interest rates are fluctuating due to the possibility that the Bank of Korea will raise rates at the January Monetary Policy Committee meeting," adding, "There is increasing demand from companies to preemptively raise funds."

Hyundai Samho Heavy Industries’ performance and financial structure have deteriorated amid years of shipbuilding industry downturn. Although sales are on an upward trend due to increased orders, the company recorded an operating loss exceeding 200 billion KRW during the third quarter of last year due to low-price orders and rising steel material costs.

The financial burden remains high. As of the end of the third quarter last year, borrowings stood at 1.26 trillion KRW, doubling compared to 600 billion KRW at the end of 2017. Short-term borrowings and long-term current liabilities that must be repaid or refinanced within one year exceed 600 billion KRW.

Recently, orders have increased centered on eco-friendly ships, and cash inflows such as advance payments are reducing the borrowing burden. An IB industry insider forecasted, "As deliveries of low-price order volumes are completed and production begins on orders secured at higher prices, sales, profitability, and financial structure are expected to improve simultaneously."

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