[Funding] Hanwha Aerospace Raises 80 Billion Won Through Loan Securitization

[Asia Economy Reporter Lim Jeong-su] Hanwha Aerospace, which serves as the intermediate holding company for Hanwha Group's aviation and defense sectors, has raised 80 billion KRW through loan securitization.

According to the investment banking (IB) industry on the 7th, Hanwha Aerospace recently borrowed 50 billion KRW and 30 billion KRW respectively from a special purpose company (SPC) established under the lead of Kookmin Bank and Shinhan Bank. The total amount of funds raised is 80 billion KRW. The maturity is 3 years, with a condition to repay the principal in a lump sum after 3 years.

Kookmin Bank and Shinhan Bank issued short-term securitized notes backed by the loan principal and interest to secure loan funds. The securitized notes have a maturity of 3 months and will be reissued 12 times over the 3 years until the loan maturity.

Both banks provided a purchase commitment for the securitized notes to the SPC. This means that if existing investors hesitate to reinvest or no new investors appear during the reissuance process, the banks will purchase the notes.

Hanwha Aerospace is known to have raised funds to repay existing borrowings. As investment burdens increased, borrowings at the end of the third quarter last year reached 2.52 trillion KRW, showing an increasing trend every year. However, as cash equivalents also increased, the net borrowing amount did not significantly rise.

Recently, amid deteriorating profitability due to COVID-19, investment burdens have increased, including participation in a third-party allotment capital increase of domestic satellite developer Satrec Initiative. An IB industry official said, "Hanwha Aerospace mainly raises investment and operating funds through corporate bond issuance and long-term bank borrowings," adding, "This fund raising is also understood to be for refinancing existing borrowings."

Meanwhile, Hanwha Aerospace's major shareholder is the group holding company Hanwha, which currently holds a 33% stake. It has subsidiaries including Hanwha Systems (48.99% stake), Hanwha Power Systems (100%), Hanwha Defense (100%), Hanwha Precision Machinery (100%), and Hanwha Techwin (100%), all defense companies within Hanwha Group.