Emergency Cash Securing Due to COVID-19, Corporate Bond Issuance Surges in February

Companies Take Proactive Fundraising Measures... Corporate Bonds Up 51%, Stocks Up 399.8%

[Asia Economy Reporter Park Jihwan] Corporate bond issuance last month increased by more than 51% compared to the previous month. This is interpreted as companies proactively securing liquidity amid the novel coronavirus disease (COVID-19) crisis.

According to the Financial Supervisory Service on the 31st, the total issuance of stocks and corporate bonds by companies last month amounted to 17.1368 trillion KRW (stocks 238.4 billion KRW, corporate bonds 16.8984 trillion KRW), an increase of 52.9% (5.9312 trillion KRW) compared to the previous month.

In particular, the scale of corporate bond issuance last month was 51.4% (5.7405 trillion KRW) higher than the previous month. Asset-backed securities (ABS), general corporate bonds, and financial bonds all increased. By company, the order was SK Hynix (1.06 trillion KRW), LG Chem (900 billion KRW), Kookmin Bank (800 billion KRW), Woori Bank (750 billion KRW), Samsung Securities (540 billion KRW), Mirae Asset Daewoo (500 billion KRW), and Hyundai Oilbank (500 billion KRW).

General corporate bond issuance was mainly focused on medium- to long-term bonds for debt repayment purposes. Last month, general corporate bonds worth 6.647 trillion KRW were issued, a sharp increase of 107.0% compared to the previous month. Among the issuance amount, bonds issued for debt repayment purposes accounted for 4.8142 trillion KRW, or 72.4%, with facility funds at 17.3% and operating funds at 10.3%.

Looking at general corporate bonds by credit rating, issuance of AA grade or higher totaled 5.77 trillion KRW, accounting for 87.4%. Those rated A or below were 837 billion KRW, or 12.6%. The proportion of AA grade or higher increased by 15.4 percentage points compared to the previous month, while the proportion of A grade or below decreased by 15.4 percentage points. High-quality companies increased corporate bond issuance to proactively respond to the spread of COVID-19. A Financial Supervisory Service official explained, "Due to concerns about global economic slowdown, low interest rate trends, and the COVID-19 situation, companies proactively raised funds." Although January had fewer business days due to the Lunar New Year holidays, the increase in business days in February was also reflected.

Additionally, financial bonds increased by 25.1% to 9.393 trillion KRW, and ABS increased by 96.0% to 858.4 billion KRW. There was no issuance of Primary Collateralized Bond Obligations (P-CBO).

At the end of last month, the outstanding balance of corporate bonds was 531.5017 trillion KRW, up 1.2% from the previous month. Last month, issuance of commercial paper (CP) and short-term bonds totaled 126.8209 trillion KRW, an increase of 4.3% compared to the previous month.

Stock issuance saw significant increases in both initial public offerings (IPO) and paid-in capital increases. Last month, stock issuance amounted to 238.4 billion KRW, a 399.8% increase compared to the previous month. This is a base effect following January’s stock issuance of only 47.7 billion KRW. Among the stock issuance amount, IPOs increased by 557.6% to 138.1 billion KRW, and paid-in capital increases rose by 275.7% to 100.3 billion KRW. The IPOs included six cases?Wise I-Tech, Seonam, Lemon, Kencoa Aerospace, JNTC, and others?all listed on KOSDAQ.