Samsung C&T Followed by Samsung Bio Public Bond Issuance Tapping
Group Affiliates' Corporate Bond Issuance Volume Jumps This Year
Samsung Electronics Large-Scale Corporate Bond Issuance Possibility 'Solsol'
Recently, Samsung Group affiliates have been consecutively issuing corporate bonds, increasing their presence in the bond market. Following Samsung C&T, Samsung Biologics is also set to issue bonds, which is expected to significantly increase the scale of Samsung Group's corporate bond issuance. There are also speculations that Samsung Electronics, the group's flagship affiliate, will enter the corporate bond market for the first time in decades.
According to industry sources on the 9th, Samsung Biologics is expected to officially announce its corporate bond issuance soon. It has recently initiated the public bond issuance process by requesting credit rating evaluations from credit rating agencies. Earlier, it was noted that the company repaid 380 billion KRW worth of bonds maturing in early September in cash, indicating no need to raise external funds at that time.
This will be Samsung Biologics' first bond issuance in three years. Since issuing 500 billion KRW worth of public bonds in September 2021, it has not appeared in the corporate bond market. During this period, it has met its funding needs through cash flow (CF) and bank loans. However, with increasing financial burdens due to recent facility investments, it is expected to increase bond issuance.
Samsung C&T, the group's holding company, is returning to the public bond market after two years and will issue 500 billion KRW worth of corporate bonds on the 10th. In a demand forecast conducted for institutional investors, investment demand exceeding 2 trillion KRW poured in for a 300 billion KRW offering. The raised funds will be used to repay loans borrowed from banks such as HSBC.
With Samsung Biologics following Samsung C&T in completing bond issuance, Samsung Group is estimated to have issued a total of over 1.5 trillion KRW in corporate bonds this year (excluding bonds issued by Samsung Card). This places the group sixth in South Korea in terms of corporate bond issuance, following SK (8.3 trillion KRW), LG (4.3 trillion KRW), Hanwha (4.1 trillion KRW), Lotte (3.6 trillion KRW), and Shinsegae (2.5 trillion KRW).
Until August, Samsung's bond issuance volume was only 850 billion KRW. In terms of corporate bond issuance volume, it ranked around 17th to 18th, following companies such as CJ, Hanjin, Daou Kiwoom, Kyobo Life Insurance, POSCO, LS, and GS.
There are also speculations that Samsung Electronics, the group's flagship affiliate, will soon issue a large-scale corporate bond. Analysts note subtle changes, such as Samsung Electronics, which has been extremely conservative in public fundraising, recently checking bond interest rate conditions with securities firms.
Samsung Electronics has maintained a no-debt policy, holding cash reserves exceeding borrowings for a long time. As of the end of June this year, its consolidated net borrowings (borrowings minus cash equivalents) stood at approximately -84 trillion KRW. From 2020 to 2022, it maintained cash equivalents exceeding borrowings by more than 100 trillion KRW.
Currently, total borrowings amount to 16.4814 trillion KRW, with outstanding bonds totaling only 420 million USD (about 570 billion KRW). Of this, 400 million USD is a dollar-denominated bond (Eurobond) issued in 2015 with a 10-year maturity by Harman International Industries, Inc., a consolidated subsidiary of Samsung Electronics.
The only outstanding bond issued directly by Samsung Electronics is about 20 million USD (approximately 2.7 billion KRW) issued in 1997 with a 30-year maturity. There are no outstanding won-denominated bonds. Samsung Electronics has not issued won-denominated bonds for over 20 years since 2001. The last foreign currency bond was issued in 2012 with a 5-year maturity.
An executive in charge of investment banking at a major domestic securities firm said, "Compared to the past, Samsung Electronics' cash flow has significantly decreased, and with large-scale semiconductor investments domestically and abroad, funding needs have greatly increased, leading to expectations of external fundraising. However, no concrete procedures such as selecting lead underwriters for bond issuance have been initiated yet."
Experts also cite the decline in market interest rates as a factor increasing the likelihood of Samsung Electronics issuing corporate bonds. Last year, Samsung Electronics borrowed 20 trillion KRW at an annual interest rate of 4.60% from its affiliate Samsung Display.
A corporate bond market insider said, "Due to expectations of interest rate cuts, bond issuance rates for high-quality companies have dropped significantly. If Samsung Electronics issues corporate bonds, it is expected to raise large-scale funds at interest rates below 3%."
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