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Private equity

Korean PEFs' 2020 investments, exits at record highs

S.Korean companies' equity and debt issues reach the largest-ever 122.8 trillion won in H1, 2021

By Jul 21, 2021 (Gmt+09:00)

(Source: Getty Imaegs Bank)
(Source: Getty Imaegs Bank)

Private equity firms registered in South Korea posted their largest-ever amount of both investments and divestments in 2020 which were almost balanced, putting a combined 18.1 trillion won ($15.7 billion) into new investments. 

Last year, the PEFs, or those classified as buyout firms by Korean regulators, invested in 565 companies, with domestic deals making up the vast majority at 86.4%, or 12.6 trillion won, according to the regulatory Financial Supervisory Service (FSS) on Wednesday.

The transactions include SkyLake Investment's 698.6 billion won purchase of battery foil maker Doosan Solus Co. and Glenwood Private Equity's 300 billion won acquisition of industrial film maker SKC Kolon PI, renamed as PI Advanced Materials Co.

"PEFs are raising their influence in the domestic M&A market as major players, improving the companies' value before listing on stock markets, or merging them into rival companies before selling them," said an FSS official.

Their divestments amounted to 17.7 trillion won, an increase of 6 trillion won from a year earlier. Premier Partners' exit from Kakao Games which went public last year and Setttlebank, a fintech platform, are among the notable divestiture.

North Asia-focused MBK Partners' exit from Daesung Industrial Gases Co. was included in the 2020 data based on closed deals. Hahn & Co.'s refinancing of H-Line Shipping Co., for which the Seoul-based PEF is preparing an initial public offering, was counted in as well. New investors led by Hana Financial Group replaced the limited partners of the bulk carrier.

The number of South Korea-registered buyout firms came to 337, an increase of 33 from a year earlier, The vast majority of them, or 245 firms, are independent buyout firms.

Last year alone, a total of 218 investment vehicles were launched by the PEFs, compared with 206 a year earlier. The 2020 number consists of 168 project funds and 50 blind pool funds. 

In total, the number of PEFs-managed investment vehicles has risen to 855 as of the end of last year, versus 316 at the end of 2015. A combined 97.1 trillion won has been committed to them as of last year, of which 70.6 trillion won were deployed, almost twice as much as in 2015. 

EQUITY AND DEBT ISSUES

In the first half of this year, South Korean companies raised a record 122.8 trillion won in both equity and debt capital markets, almost four times as much as in the year-earlier period.

They took full advantage of ample market liquidity to fund investment and business expansion. In particular, an increasing number of companies with low credit ratings jumped into the debt capital market. They account for almost 30% of new corporate bond issues in 2020, versus 20% a year earlier.

Of the new bond issues, 45% were sold to finance investment, while the other 55% were used to repay debt. In the year-earlier period, 70% of new corporate debt was used to pay off debt.

Equity issues, including IPOs and rights offerings, amounted to 12.6 trillion won, a sixfold jump from a year earlier. 

H1 2021  H1 2020
IPOs 3.2 trillion won (49)  N/A
Rights issues 9.4 trillion won (31) 1.08 trillion won (14)
Bond issues 110.1 trillion won 89.4 trillion won
Note: Numbers in parentheses refer to the number of offerings or issues.
Source: Financial Supervisory Service

Korean Air Lines Co. took one-third of the first-half rights issues at 3.3 trillion won in the largest-ever rights offering by a domestic company. The airline is completing its 1.8-trillion-won acquisition of local rival Asiana Airlines Inc.

POSCO Chemical Co. and Hanwha Solution Co. each raised t 1.3 trillion won in new share sales to expand their capacity.

KOREAN TEACHERS' CREDIT UNION

Meanwhile, the Korean Teachers’ Credit Union on July 20 picked eight homegrown PEFs for a combined 475 billion won mandates.

E&F Private Equity, IUM Private Equity, Keistone Partners, Crescendo Equity Partners and Premier Partners will be receiving a combined 400 billion won from the teachers' fund.

Three rookie PEFs – Sevenbridges Private Equity, Well to Sea Investment and J&Private Equity -- will be awarded 75 billion won in aggregate.

J& Private Equity is buying a 90% stake in Hyundai Oil Terminal Co. from Hyundai Oilbank Co. for about 180 billion won

Write to Hyunil Lee at hiuneal@hankyung.com

Yeonhee Kim edited this article.

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