Hanyang and Hwashin... Mid-sized Companies Successively Issue Corporate Bonds Supported by KODIT

7 BBB-Rated or Lower Companies Issue 100 Billion Won Private Bonds
Issuance Increases Amid Concerns Over Chain Defaults Triggered by Taeyoung Construction
Managed by Kiwoom Securities and Korea Asset Securities Through P-CBO

As discussions on the workout (corporate financial restructuring) of Taeyoung Construction continue, companies with credit ratings of BBB or lower, which find it difficult to raise funds independently, have issued private bonds worth 100 billion KRW with government support. As concerns over a chain of defaults in construction project financing (PF) unsettle the bond market, the number of companies seeking to issue bonds with government backing is increasing.

According to the investment banking (IB) industry on the 8th, seven mid-sized companies, including mid-sized construction company Hanyang (credit rating BBB+), auto parts manufacturer Hwashin (BBB), and mid-sized distribution company Shinseong Tongsang (BBB), issued a total of 100 billion KRW in corporate bonds with support from the Korea Credit Guarantee Fund (KODIT). Hanyang and Hwashin each issued the largest amount of bonds at 17.5 billion KRW. Shinseong Tongsang (14 billion KRW), Gibos Steel (14 billion KRW), Shinyoung (12 billion KRW), Korea Rental (10.5 billion KRW), and Gwangseong Enterprise (8 billion KRW) were also included among the supported bond issuers.

The private bonds issued by companies supported by KODIT all have a maturity of two years, with issuance interest rates ranging from 4.5% to 6.9%. Among the supported companies, Hanyang, which has the highest credit rating, had the lowest interest rate at 4.594%, while Gwangseong Enterprise (B+), with the lowest credit rating, had the highest rate at 6.844%. For companies with credit ratings of BBB or lower, this means they are able to issue bonds at relatively low interest rates.

The corporate bonds issued by these companies were underwritten by Kiwoom Securities and Korea Asset Investment Securities. These two securities firms transfer the underwritten bonds to a special purpose company (SPC), then reissue them as project collateralized bond obligations (P-CBOs) backed by KODIT guarantees. The senior tranche CBOs are sold to institutional investors, while the subordinated tranche CBOs are divided and subscribed to by the bond-issuing companies themselves.

As concerns over PF defaults deepen the polarization of the funding market, the number of low-credit companies seeking KODIT support is expected to rise rapidly. However, while the number of companies seeking government support is increasing, there are ongoing criticisms that the scale of support is limited. A bond market insider stated, "Companies that find it nearly impossible to issue bonds in the market are securing refinancing or operating funds through government support, but the amount of support from KODIT is not sufficient."

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