‘Deficit Swamp’ SK Hynix Raises 360 Billion Won Using Purchase-Only Cards

After Signing Card Contract with Hyundai Card, Securitization of Accounts Receivable
Temporary Relief of Operating Fund Burden... Comprehensive Fundraising through Corporate Bonds and EB

SK Hynix has raised an additional 360 billion KRW by entering into a corporate purchase-only card agreement with Hyundai Card. This is interpreted as part of a comprehensive fundraising effort, including the issuance of exchangeable bonds (EB), corporate bonds, and commercial paper (CP), amid growing financial burdens due to large-scale deficits.

According to the investment banking (IB) industry on the 11th, SK Hynix signed a purchase-only card agreement worth 360 billion KRW with Hyundai Card. Under the contract, when SK Hynix pays purchase amounts by card, the suppliers receive payments from the card company. SK Hynix decided not to pay the settlement amount immediately but to split the payment into 72 billion KRW monthly installments over five months starting in May.

Hyundai Card selected Bookook Securities as the lead manager to securitize the card receivables used by SK Hynix. The card receivables are transferred to a special purpose company (SPC), which then issues securitized bonds backed by these receivables. Investors in the securitized bonds receive principal and interest repayments when SK Hynix settles the card payments.

Nominally, Hyundai Card is the one raising funds, but from SK Hynix’s perspective, which can defer payment dates to suppliers, this functions as a kind of short-term operating capital procurement. Since the card company transfers the corporate card payment receivables to securitized bond investors, a card usage contract for the necessary amount must be established between the company and the card issuer.

Corporate purchase-only cards are credit cards used between companies for purchasing goods between buyers and suppliers. They were developed as an alternative to promissory notes to address side effects arising from the traditional practice of exchanging notes between parties during transactions. Large corporations mainly use them to alleviate the burden of large-scale operating funds. An IB industry official said, "Large corporations can adjust the payment dates of accounts payable by using purchase-only cards, so they can also be used for operating fund management."

SK Hynix is pursuing comprehensive fundraising as financial burdens increase due to the semiconductor market downturn. This year, it issued large-scale corporate bonds worth 1.39 trillion KRW. Recently, it selected Merrill Lynch as the lead manager and issued 2 trillion KRW worth of EB. A corporate bond market official said, "As SK Hynix’s cash flow deteriorates, the burden of operating funds continues to grow," adding, "They will continue to increase external fundraising until sales and profits normalize."

An SK Hynix official said, "The purchase-only card is one of the corporate purchase payment methods, and this is a re-signing of an existing agreement with Hyundai Card," adding, "It is not for liquidity securing purposes."