SK Hynix set for largest-ever corporate bond issue at bargain prices

SK Hynix Inc., the world’s second-largest memory chipmaker, is gearing up for its largest-ever corporate bond issue in South Korea at lower-than-market average costs as local companies accumulate cash, taking advantage of strong investor demand for debts around the beginning of the year.

SK Hynix plans to issue 1.4 trillion won ($1.1 billion) in won-denominated bonds, double its initial plan of 700 billion won, as the South Korean tech giant received 2.6 trillion won worth of orders from institutional investors during a bookbuilding session on Tuesday, said investment banking industry sources.

A three-year bond drew 1.3 trillion won, while a five-year note fetched 1 trillion won, the sources said on Wednesday. A seven-year bond and 10-year debt pulled in 150 billion won and 95 billion won, respectively.

LOWER COSTS ON STRONG DEMAND

The company is set to sell 430 billion won in three-year bonds, 780 billion won in five-year notes, 100 billion won in seven-year bonds and 80 billion in 10-year debt on Feb. 14. It will use the proceeds to repay existing debts.

SK Hynix succeeded in issuing those bonds at lower yields than the average interest rates for the same maturities suggested by credit rating agencies by 2 basis points (bps)-30bps as institutional investors scrambled for the bonds by proposing low borrowing costs, sources said.

“It is significant to sell long-term bonds such as the seven- and 10-year debts, which have not been issued for a long time, at lower interest rates than the average,” said a major brokerage house official.

Institutional investors often spend more around the beginning of a year after securing their annual budgets. That helps other companies raise more money than planned through bond issuances.

LG Innotek Co., a major South Korean supplier of Apple Inc.’s iPhone, is scheduled to sell 400 billion won in corporate bonds on Feb. 14, double its initial plan of 200 billion won. Hanwha Solutions Corp., an energy and petrochemical company, also plans to raise 300 billion won through a bond sale on the day, twofold its earlier target of 150 billion won.

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

Jongwoo Cheon edited this article.