SK Chemicals' bond oversubscribed with $526 mn demand

SK Chemicals Co., a unit of South Korea’s No. 2 conglomerate SK Group, is set for a successful debt issue as the company’s bond sale has drawn strong interest from investors, despite the prolonged downturn in the petrochemical industry. 

SK Chemicals attracted a total of 726 billion won ($525.7 million) for its 80 billion won debt sales on Thursday, banking sources said. The company’s 50 billion won bond with a three-year maturity and 30 billion won bond with a two-year maturity drew 448 billion won and 278 billion won from investors, respectively, marking it together nearly eight times oversubscribed. 

The company is considering increasing sales of the bond, rated A+ by domestic credit rating agencies, to 150 billion won.

SK Chemicals plans to use the proceeds for debt redemption. The company’s 35 billion won debt matures in August; it must also repay 50 billion won worth of commercial papers by next month.

The company’s recent decision to withdraw its pharmaceutical unit deal has been favored by investors and boosted demand for the bond sale, market insiders said.

The chemical product maker was slated to sell its pharmaceutical division for around 600 billion won to Seoul-based Glenwood Private Equity last year, in efforts to expand the company’s eco-friendly and biomaterial production, including its growth pillar plastic recycling. But the deal was dropped in February after five-month-long negotiations.

The pharmaceutical unit is a cash cow for SK Chemicals, which sees its green chemicals business suffer a slowdown in the petrochemical market with capacity oversupply led by China.

Investor demand for chemicals and petrochemicals firms has become more polarized depending on companies’ creditworthiness, earnings and financial stability.

Hyosung Chemical, which has a nearly 5,000% debt-to-equity ratio, saw no institutional investor demand for its 50 billion won bond with a BBB+ rating on April 8.

Yeochun NCC Co., a leading petrochemical product maker, had only 25 billion won in subscriptions for its 150 billion won bonds with an A rating on March 11.

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

Jihyun Kim edited this article.