Public Enterprises with Weak Financial Structures See Short-Term Funds Increase 2.8 Times in First Half... Large Corporations Are No Exception

CEO Score, Survey Results on Direct Financing Amounts of 187 Large Corporations

[Asia Economy Reporter Moon Chaeseok] The scale of short-term funding procurement by major public enterprises in the first half of the year increased 2.8 times compared to the same period last year. This is interpreted as a result of heavy reliance on short-term funds such as commercial paper (CP) and short-term bonds to secure liquidity due to weak financial structures. Large corporations also did not escape this trend.

On the 24th, CEO Score, a corporate data research institute, investigated the direct financing fund procurement status of 187 companies among the top 500 companies that submitted semi-annual reports. The amount of direct financing fund procurement in the first half of the year was recorded at 146.3074 trillion KRW, an increase of 59.5881 trillion KRW (68.7%) compared to the previous year.

The issuance amount of corporate bonds with a maturity of over one year was 40.1524 trillion KRW, and CP and short-term bonds amounted to 106.155 trillion KRW, with short-term funds (CP and short-term bonds) accounting for 72.6% of the total fund procurement amount. Compared to the first half of last year, short-term fund procurement more than doubled, and the proportion of short-term funds increased by 13.1 percentage points. Direct financing fund procurement includes corporate bonds over one year, CP, and short-term bonds, excluding stocks.

Lobby of Korea Electric Power Corporation Headquarters, Bitgaram Innovation City, Naju-si, Jeollanam-do. (Image source=Yonhap News)

In particular, in the first half of this year, fund procurement by major public enterprises significantly increased centered on CP and short-term bonds. The direct financing fund procurement amount of public enterprises was 89.3089 trillion KRW, a surge of 59.5145 trillion KRW (199.8%) compared to the first half of last year (29.7943 trillion KRW). Among these, short-term fund procurement amounted to 69.516 trillion KRW, a sharp increase of 177.9% (2.8 times) compared to 25.012 trillion KRW in the first half of last year.

Korea Electric Power Corporation (KEPCO) had the largest increase in direct financing fund procurement in the first half, amounting to 30.8112 trillion KRW. Its corporate bond procurement was also the highest at 15.2612 trillion KRW. The size of corporate bonds issued by KEPCO accounted for 38% of the total.

The largest increase in short-term funds was by Korea Gas Corporation (28.816 trillion KRW↑), followed by KEPCO (16.810 trillion KRW↑), CJ CheilJedang (4.170 trillion KRW↑), E-Mart (1.334 trillion KRW↑), and Samsung C&T Corporation (1.245 trillion KRW↑).

A CEO Score official said, "Due to the adverse effects of COVID-19 and rapidly rising market interest rates, uncertainty in the global financial market has increased, causing the corporate bond market to shrink. Therefore, it seems that companies' demand for short-term fund procurement has increased to secure liquidity."