Securing Additional Liquidity After 350 Billion Won Public Bond Issuance
Trillions Invested in North American Solar Power and Affiliate Capital Contributions
Continued Borrowing Expansion Expected... Warning Signs for Financial Stability Threat
Hanwha Solutions' borrowings have nearly reached 10 trillion won as it continues aggressive fundraising. Following large-scale mergers and acquisitions (M&A) of REC Silicon and Hanwha Impact, the company has increased overseas investments to vertically integrate its North American solar power business, leading to a rise in borrowings. Recently, with increased investments in domestic and international joint ventures (JVs) such as Hanwha Futureproof and Hanwha Global Asset, the trend of leveraged management is accelerating.
350 Billion Won Public Bonds and 100 Billion Won Private Loans... Consecutive Fundraising
According to the investment banking (IB) industry on the 5th, Hanwha Solutions recently received a loan of 100 billion won from a special purpose company (SPC) organized by Woori Bank. The SPC issued securitized bonds of the same amount based on the loan principal and interest to be repaid by Hanwha Solutions. Investors in the securitized bonds receive principal and interest payments from the SPC when Hanwha Solutions repays the loan principal and interest.
In mid-January, Hanwha Solutions issued 350 billion won worth of public corporate bonds with Samsung Securities and NH Investment & Securities as lead managers. The funds raised through the bond issuance were planned to be used to repay maturing commercial papers (CP) and corporate bonds. Including public bonds and private loans, the company has raised approximately 450 billion won in long-term funds this year.
Short-term borrowings under one year, such as CP and electronic short-term bonds (hereafter CP), are also on the rise again. Hanwha Solutions used the funds raised from the bond issuance in January mainly to repay CP, reducing the CP balance to 440 billion won. However, recent increases in short-term borrowings have raised the CP balance to 640 billion won.
As fundraising continues to increase, Hanwha Solutions' total borrowings have approached 10 trillion won. From about 6 trillion won at the end of 2021, borrowings have increased by 4 trillion won over one year and nine months. During the same period, net borrowings (borrowings minus cash equivalents) rose from 4.6 trillion won to 7 trillion won.
An IB industry insider diagnosed, "As borrowings mature continuously, Hanwha Solutions relies on external financing not only to refinance borrowings but also to fund new investments in solar power and other areas, causing borrowings to increase rapidly."
‘10 Trillion Won Borrowings’ Financial Burden Expands
Hanwha Solutions' financial burden is expected to continue growing due to planned large-scale investments in North American solar power vertical integration and other areas.
According to Hanwha Group's five-year investment plan announced in 2022, the group plans to invest about 37.6 trillion won in new businesses such as solar power, wind power, defense, and aerospace by 2026. Of this, more than 10 trillion won in new investments will be concentrated in Hanwha Solutions. In particular, approximately 7.3 trillion won will be invested in the North American solar power business.
Accordingly, Hanwha Solutions has significantly increased its investment scale through large-scale facility expansions and acquisitions of shares in REC Silicon and Hanwha Impact. Despite sluggish petrochemical business performance, investments in North American solar power have continued to grow.
Recently, a substantial amount of funds has also been invested in domestic and overseas affiliate capital contributions. The company injected 500 million dollars (about 655.7 billion won) into a capital increase of the overseas joint venture Hanwha Futureproof and participated in paid-in capital increases of Hanwha Global Asset and others.
An IB industry insider said, "With the burden of new investments, affiliate capital contributions, and maturing borrowings overlapping, and with solar power and petrochemical performance not improving rapidly, the financial burden is increasing," adding, "Hanwha Solutions will likely have to continue increasing external borrowings for some time."
There are also warnings about credit rating downgrades. A credit rating agency official stated, "Hanwha Solutions' aggressive investments are threatening its financial stability," and predicted, "How the company manages its financial stability going forward will have a significant impact on its credit rating."
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