POSCO to issue up to $553 million in unsecured bonds

South Korea's top steelmaker POSCO Holdings Inc. is expected to issue won-denominated unsecured bonds worth up to 700 billion won ($553.9 million) twice as much as originally planned.

The company on Friday announced that it attracted 3.9 trillion won in purchase orders, nine times the targeted amount, from its demand forecast the day before ahead of its issuance of 350 billion won in unsecured bonds. Two-year bonds for 50 billion won saw orders for 900 billion won, three-year bonds for 2.1 trillion won attracted 200 billion won and five-year bonds for 100 billion won brought in 955 billion won.

The amount of purchase orders is the largest since the country's adoption in 2012 of the demand forecast system for domestic corporate bond issuance.

POSCO will raise the issuance amount based on its massive bond success that overwhelmed early market expectations. Even if the sum reaches 700 billion won, or twice the initial target, the issuance can carry an interest rate 60 to 50 basis points lower than the average rate of the nation's three major bond evaluation companies suggest.

Prior to its bond issuance, POSCO proposed an interest rate band of minus 30 to plus 30 basis points from the average rate based on its high credit rating of "AA+" from Korea Ratings and Korea Investors Service.

The company's demand forecast also covered retail demand along with institutional investors such as pension funds, Korea Post, banks, insurers, asset management companies and brokerages.

Thus demand for all tranches skyrocketed more than nine fold and each tranche completed bidding with an interest rate 63 to 50 basis points lower than the average rate of the nation's three major bond evaluation companies proposed.

"POSCO has successfully raised funds preemptively to prepare for an unstable environment in financial markets worldwide and lower liquidity, allowing the company to boost its cash-oriented management under the emergency management system," a POSCO source said.

Write to Ik-Hwan Kim at lovepen@hankyung.com