A Series of Corporate Bond Maturities... SK Chemicals Takes a Breather with EB Issuance

Corporate Bonds Worth 120 Billion Won Maturing Next Year
Cash Holdings at 32.39 Billion Won, Limited Repayment Capacity
Project Financing Remains, Diversification of Borrowing Structure Inevitable

The recent decision by SK Chemicals to issue exchangeable bonds (EB) worth 220 billion won was driven by the looming maturities of its corporate bonds and the burden of short-term borrowings. While this move has provided some breathing room for short-term liquidity, industry observers point out that, given the scale of the company’s debt, relying solely on EBs has its limitations. They stress that diversifying the borrowing structure and strengthening funding strategies will be unavoidable going forward.

According to the Financial Supervisory Service’s electronic disclosure system on September 21, SK Chemicals faces a series of corporate bond maturities: 70 billion won in February and 50 billion won in April next year, 70 billion won in January and 100 billion won in April 2027, and another 100 billion won in January 2028. As of the first half of this year, the outstanding balance of corporate bonds stood at 390 billion won, of which 119.8 billion won is classified as “bonds maturing within one year” and must be repaid by the first half of next year.

SK Chemicals headquarters exterior. Photo by SK Chemicals

As of the end of June, total consolidated borrowings, including corporate bonds, amounted to 774.3 billion won. Of this, short-term borrowings accounted for about 500 billion won, consisting of 373.7 billion won in short-term loans, 119.8 billion won in bonds maturing within one year, and 6.7 billion won in current portion of long-term borrowings. In the first half of the year, interest payments alone amounted to 23.2 billion won in cash outflows from operating activities.

In contrast, as of the same date, cash and cash equivalents totaled only 323.9 billion won, indicating that the company’s capacity to cover maturing debt on its own is limited. The newly issued EBs have a coupon and maturity interest rate of 0%, with a lump-sum repayment at maturity, clearly serving as a “breathing space” measure. The industry expects that the funds raised through the EBs will act as a buffer for repaying corporate bonds maturing early next year and for covering short-term borrowings.

However, bondholders have the option to request early redemption every quarter starting from October 2028, which could accelerate the repayment schedule. If this occurs, the lump-sum repayment effect of the EBs could be diluted, and the company may face faster-than-expected cash outflows. Industry experts note that while the EBs help stabilize the company in the short term, they could become an additional burden if their maturity overlaps with other corporate bond maturities, necessitating refinancing strategies.

Another variable is the 660 billion won combined heat and power plant project financing (PF) by subsidiary SK Multi Utility. As the parent company, SK Chemicals has committed to fully cover any funding shortfalls and has pledged stocks and shareholder loans as collateral up to 120% of the loan agreement amount. In the first half of this year alone, the company injected 59.1 billion won in cash. Analysts note that the liquidity secured via the EBs can serve as a buffer not only for corporate bond maturities but also for absorbing PF-related risks.

However, if additional funding needs arise during the operation of the power plant, EBs alone may not be sufficient. This is why there is a growing consensus that, in the long term, diversifying the borrowing structure and reinforcing funding strategies will be essential. An SK Chemicals representative stated, “This is part of our financial strategy for stable debt repayment,” adding, “We will strengthen our financial soundness to ensure sustainable growth.”

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