POSCO Successfully Issues 700 Billion KRW Unsecured Corporate Bonds

Massive Orders of 3.97 Trillion Won Flood the First Demand Forecast of 2023

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Dong-hoon] POSCO has successfully issued up to 700 billion KRW worth of unsecured won-denominated bonds.

In the demand forecast conducted on the 5th ahead of issuing 350 billion KRW worth of unsecured bonds, POSCO received purchase orders totaling 3.97 trillion KRW, which is nine times the target amount. For the 2-year bonds with a target of 50 billion KRW, orders reached 900 billion KRW; for the 3-year bonds with a target of 200 billion KRW, orders reached 2.115 trillion KRW; and for the 5-year bonds with a target of 100 billion KRW, orders reached 955 billion KRW. This is the largest scale since the introduction of the domestic corporate bond demand forecast system in 2012.

Despite the intensified volatility in the financial market due to the rapid global base rate hikes continuing since last year, POSCO succeeded in issuing bonds, which was recognized as high-quality bonds.

In particular, POSCO succeeded in issuing large-scale bonds at the time when it had quickly restored the flood damage at the Pohang Steelworks and established a normal product supply system. Although production disruptions occurred due to flooding caused by the cold stream overflow at Pohang Steelworks in September last year, all employees made every effort to restore operations, and on the 15th of last month, POSCO restarted the core 2 hot-rolling mill at Pohang Steelworks, normalizing steel supply within the year.

Before issuing the bonds, POSCO presented a desired interest rate band by adding -30bp (0.01%) to +30bp to the market average rate based on the high credit rating of AA+ received from Korea Ratings and Korea Investors Service. The demand forecast attracted participation from numerous institutional investors including pension funds, Korea Post, banks, insurance companies, asset management firms, securities companies, as well as retail demand. As a result, all tranches received demand exceeding nine times the supply, and bidding was completed at interest rates ranging from -63bp to -50bp compared to the market average rate for each tranche.

Due to the large-scale success exceeding initial market expectations, POSCO plans to increase the issuance amount. Even if issued at 700 billion KRW, which is twice the initially registered amount, it is possible to issue at interest rates 50bp to 60bp lower than the individual market average rate.