[Funding] Hanseong Enterprise Eases Short-Term Borrowing Burden with KODIT-Supported Private Bonds

[Asia Economy Reporter Lim Jeong-su] Hanseong Enterprise, a KOSPI-listed company engaged in distant-water fishing and seafood processing, recently raised 10 billion KRW in funds with the support of the Korea Credit Guarantee Fund to repay short-term borrowings. The repayment burden increased as the maturities of borrowings, which had grown due to large-scale fleet investments in the past, came due.

According to the investment banking (IB) industry on the 11th, Hanseong Enterprise recently issued 10 billion KRW worth of private bonds underwritten by Hyundai Motor Securities. The maturity is three years, and the interest rate was reportedly set at the high 2% range. With the guarantee from the Credit Guarantee Fund, they were able to issue relatively long-term bonds at a low interest rate.

Hanseong Enterprise issued private bonds to repay short-term borrowings. Although it turned profitable last year, the repayment burden on short-term borrowings remains high relative to cash generation due to still weak profitability. A Hanseong Enterprise official explained, "We raised long-term funds with a three-year maturity and repaid short-term borrowings to reduce the short-term repayment burden."

The increase in Hanseong Enterprise’s borrowing burden began in 2012. Borrowings started to rise as large-scale investments were made for shipbuilding for distant-water fishing. Ship investments continued until 2014 and concluded in 2015. However, borrowings increased to over 110 billion KRW during this period.

The increased borrowings at that time remained unchanged for more than five years. Even after the large-scale investments, Hanseong Enterprise’s profitability continued to decline, preventing significant reduction of borrowings. Although borrowings have been slightly reduced recently, the burden of repaying short-term borrowings has rather increased.

As of the end of the first quarter this year, Hanseong Enterprise’s borrowings based on separate financial statements stood at 89.7 billion KRW, down more than 20 billion KRW from 112.4 billion KRW in 2019. However, short-term borrowings and current portions of long-term liabilities that must be repaid or refinanced within one year amount to 88.3 billion KRW, accounting for most of the borrowings.

Profitability is showing some improvement. Last year, the processed food division’s performance improved, recording an operating profit of 6.4 billion KRW. In the first quarter of this year, operating profit was 1.2 billion KRW, slightly down from 1.7 billion KRW in the same period last year.

A credit rating agency official evaluated, "Annual EBITDA is around 7 to 8 billion KRW, and the borrowing burden is somewhat excessive relative to cash generation capacity. Especially, since the maturities of borrowings are concentrated in the short term, the short-term repayment burden is large."

A Hanseong Enterprise official stated, "We plan to continuously seek additional funding methods to improve the maturity structure of borrowings."