San-eun and Shinsegae Property, subsidiaries of major corporations, also support ESG bond issuance

[Asia Economy Reporter Lim Jeong-su] Large conglomerate affiliates such as Shinsegae Property and SK Shipping have issued ESG (Environmental, Social, and Governance) bonds worth 170 billion KRW with the support of KDB Industrial Bank. The scope of KDB’s ESG bond issuance support is expanding from mid-sized companies to large conglomerate affiliates.

According to the investment banking (IB) industry on the 22nd, KDB acquired private bonds worth 170 billion KRW issued by special purpose companies (SPCs) including Shinsegae Property (60 billion KRW), Shinsegae Casa (20 billion KRW), SK Shipping (40 billion KRW), Clean Planet (30 billion KRW), and HL Clemoove (20 billion KRW). All these bonds were issued as ESG bonds.

Shinsegae Property is an affiliate of the Shinsegae Group that develops and operates complex shopping malls including Starfield nationwide. E-Mart holds 100% of its shares. Shinsegae Casa was renamed after Shinsegae acquired the furniture and interior manufacturing and sales company Casamia in 2018. Shinsegae holds 95.7% of the total shares.

SK Shipping is a shipping company affiliated with the SK Group. SK Maritime and SK held majority shares, but in 2018, private equity firm Hahn & Company invested, making Hahn & Company the largest shareholder. HL Clemoove is a newly established affiliate of the Halla Group specializing in autonomous driving.

KDB Industrial Bank issued collateralized debt obligations (CDOs) backed by the acquired bonds to raise funds for the bond acquisition. During the CDO issuance process, credit was also extended to the SPC. The maturity of all privately placed bonds issued by the companies is three years with a lump-sum repayment at maturity. However, early redemption can be requested if the credit rating of the respective company falls below a certain level.

KDB has mainly supported ESG bond issuance for mid-sized companies so far. Earlier this month, it supported the issuance of ESG bonds worth 155 billion KRW, including affiliates of the Nepes Group such as Nepes Lawe (50 billion KRW) and Nepes Arc (30 billion KRW), as well as Hwasung Materials (30 billion KRW), Samki (25 billion KRW), and Daechang (20 billion KRW).

In July, mid-sized companies such as SGC Energy (30 billion KRW), Danseok Industry (30 billion KRW), Disec (20 billion KRW), Seojin Industry (10 billion KRW), and Motrex (10 billion KRW) issued green bonds with KDB’s support. The total issuance scale of ESG bonds supported at that time was 100 billion KRW. So far, KDB has supported ESG bond issuance totaling 425 billion KRW.

KDB launched support projects to enable mid-sized companies to participate in the ESG bond market. This was based on the perception that while large corporations and public enterprises can raise funds at low interest rates by issuing ESG bonds, mid-sized companies are completely excluded from the ESG bond market.

However, concerns have been raised that the original purpose might be somewhat diluted as KDB also acquires ESG bonds issued by large conglomerate affiliates. An IB industry official pointed out, "Although they meet ESG requirements, it aligns with KDB’s original support purpose to include as many mid-sized and small companies as possible that find it difficult to issue ESG bonds due to credit issues."