Yeocheon NCC, 'Explosion Accident Aftermath' Company Bond Demand Forecast Fully Unsubscribed

[Image source=Yonhap News]

[Asia Economy Reporter Park Ji-hwan] Yeocheon NCC, which recently experienced an explosion accident at a factory in the Yeosu National Industrial Complex in Jeonnam, received a complete failure in demand forecasting for corporate bonds.

According to the investment banking (IB) industry on the 14th, Yeocheon NCC attempted to raise a total of 200 billion KRW with 120 billion KRW in 3-year bonds and 80 billion KRW in 5-year bonds, but the bonds were strategically left unsold. Yeocheon NCC offered an interest rate band of minus (-) 30 basis points (1bp=0.01%) to 30bp for the 3-year bonds and -30bp to 50bp for the 5-year bonds, but institutional investors ignored the offer.

Originally, Yeocheon NCC planned to use the corporate bond issuance funds to refinance 100 billion KRW worth of corporate bonds maturing in August this year and to repay 40 billion KRW in facility funds borrowed from KDB Industrial Bank.

This failure in demand forecasting has increased the burden on securities firms that signed the total underwriting agreement for the corporate bonds. The lead managers are KB Securities, Korea Investment & Securities, and NH Investment & Securities. An IB industry official said, "It seems that Yeocheon NCC's failure in demand forecasting was due to launching the corporate bond issuance without properly communicating with the market after the explosion accident," adding, "Since it is a total underwriting, currently the securities firms have to bear the entire underwriting burden."

Earlier, on the 11th, an explosion accident occurred at the Yeosu factory of Yeocheon NCC, resulting in 4 workers dead and 4 injured.

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