Korean brokerages expand bond issues to repay short-term debts

South Korea’s mid-sized brokerage firms are increasingly embracing bond sales as several large firms sold their bonds in January amid investors’ strong demand for corporate debts at the beginning of the year.

Taking advantage of ample liquidity and improved investor sentiment, smaller brokerage houses are issuing corporate debts with years of maturity to replace short-term debts such as commercial papers.  

Hanwha Investment & Securities Co., a mid-sized brokerage firm with a credit rating of AA-, held bookbuilding on Monday for its bond sales worth 150 billion won ($112.1 million), comprised of 100 billion won with two-year maturities and 50 billion won for three-year ones. 

The firm drew 422 billion won in bids, comprised of 258 billion won for bonds with two-year maturities and 164 billion won for three-year ones. 

Hanwha’s bonds were sold at lower rates than local credit rating agencies’ price guidance. The firm is considering increasing the issuance from the initially planned 150 billion won to 300 billion won.

Some smaller brokerage houses are attracting investors with more than 4% yields in their bond sales.

Yuanta Securities Korea Co., the Korean investment banking affiliate of Taiwan’s Yuanta Financial Holdings, attracted 466 billion won in bids early this month for 150 billion won worth of sales. On Feb. 15, the firm issued its three-year bonds at a 4.41% yield with a rating of AA-.

Hyundai Motor Securities Co., Hyundai Motor Group’s investment banking affiliate, drew 660 billion won in bids on Feb. 16 for 100 billion won worth of bond sales. The firm will use the proceeds to repay its short-term debts, according to banking sources.

Meanwhile, several large brokerage firms such as Mirae Asset Securities Co., Samsung Securities Co., KB Securities Co. and NH Investment & Securities Co. saw a bull run on their corporate bonds last month amid investors' strong demand.

Mirae Asset issued $600 million worth of foreign currency bonds last month. The notes with three- and five-year maturities were more than 10 times oversubscribed, attracting nearly $7 billion in bids.


Write to Hyun-Ju Jang at blacksea@hankyung.com

Jihyun Kim edited this article.