Korean firms rush to issue bonds before presidential election

South Korean companies are flocking to the corporate bond market ahead of the country’s presidential election early next month, seeking to lock in funding before potential market volatility.

According to investment banking industry sources on Wednesday, about 10 companies, including SK Group’s holding firm SK Corp., Hanwha Energy Corp. and Korean Air Lines Co., plan to tap institutional demand before the June 3 snap election, which follows the impeachment of former President Yoon Suk Yeol.

The wave of corporate debt issuance in April and May comes despite a typical seasonal lull following the March earnings period.

Public bond issuance totaled 13.50 trillion won ($9.5 billion) in April, more than doubling from the same month of last year. Net issuance, excluding redemptions, jumped to 4.42 trillion won, reversing a 3.91 trillion won net contraction a year ago.

“Companies are front-loading funding to avoid potential market volatility tied to a big political event like a presidential election,” said an official at a domestic brokerage house.

With growing expectations for a policy rate cut by the Bank of Korea, the timing is also favorable, added the official.

SK, HANWHA AND KOREAN AIR LEAD

SK Group is back in the bond market to raise capital just a month after its affiliates – SK Broadband Inc. and SK Innovation Co. – raised 200 billion won and 800 billion won, respectively, through debt sales.  

Its holding company, SK Corp., plans to issue 450 billion won worth of corporate bonds across four tranches with maturities of three, five, seven and 10 years.   

Korean Air plans to sell three- and five-year notes worth up to 200 billion won in early preparation to repay debts maturing in September to mitigate uncertainty.

Hanwha Energy, wholly owned by Hanwha Group Chairman Kim Seung-youn’s three sons, is scheduled to raise 120 billion won in two- and three-year bonds, with a possible upsizing to 170 billion won depending on demand.

Seoul Broadcasting System (SBS), a key affiliate of Taeyoung Group, is also returning to the market a year after its last debt sale. It plans to tap institutional demand during bookbuilding next week to raise 150 billion won.

Write to Jeong-Cheol Bae at bjc@hankyung.com
Sookyung Seo edited this article.