Hyosung Chemical fails to sell any bonds in demand forecast

South Korea's Hyosung Chemical has failed to receive a single purchase order in its demand forecast for corporate bond issuance.

Investment banking sources on Wednesday said the company, which knocked on the market with its first "A" corporate bond rating this year, received a disappointing report card.

The company on the day before failed to receive a single buy order in its demand forecast for corporate bonds worth 120 billion won ($967 million) comprising 50 billion won for bonds of a year and six months and 70 billion won for those of two years.

The Korea Development Bank (KDB), a government-run institution that participated with the underwriting team, bought 70 billion won of the company's unsold stock, meaning the entire amount remained unsold.

Bond experts said time is needed for the effect of the market for premium corporate bonds to spread to non-premium bonds.

Hyosung Chemical's credit rating was apparently shaken last month after the domestic ratings agency Korea Investors Service downgraded the company's outlook from "stable" to "negative."

Hyosung Chemical's subscription date for corporate bonds is Jan. 27. If investors do not buy the bonds, underwriter KB Securities will take over 30 billion won worth and Korea Investment and Securities 20 billion won of the unsold amount, in addition to the KDB's 70 billion won.

Given the lack of sales in the demand forecast for Hyosung Chemical, the nation's first bond issuer with a credit rating of "A" or lower this year, noticeable differentiation is expected in the otherwise hot corporate bond market this year.

The demand forecast for the corporate bonds of LG Chem, whose rating is "AA+," was done on the same day as Hyosung Chemical and attracted 3.8 trillion won for bond issuance of 400 billion won.

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