Energy Companies Lead Most Won Debt in Four Months as Costs Fall
GS Caltex Corp., South Korea’s second-biggest oil refiner, and gas distributor SK E&S Co. led the busiest week of corporate bond issuance in four months as borrowing costs dropped to a record low.
Sales jumped to 1.76 trillion won ($1.62 billion) this week from 380 billion won in the previous seven-day period, according to data compiled by Bloomberg. Average yields on three-year corporate notes rated at AA- fell to a record low of 3.02 percent yesterday according to data from the Korea Financial Investment Association going back to 2000. U.S. corporate bonds rated at AA yield 2.10 percent, Bank of America Merrill Lynch’s indexes show.
Companies in Asia’s fourth-largest economy increased issuance this week as Bank of Korea Governor Kim Choong Soo said an improved global outlook boosts the odds of South Korea exceeding this year’s growth forecast, signaling that further monetary easing won’t be needed for now. The central bank kept the benchmark seven-day repurchase rate at 2.75 percent on Feb. 14 after 25-basis-point cuts in July and October.
“Issuers seem to want to get funding in advance while yields are low,” said Hwang Won Ha, a senior analyst with HMC Investment Securities Co. “The market consensus is for a recovery gathering pace in the second half and for overall rates heading north as a result.”
GS Caltex raised 100 billion won by selling five-year 3.01 percent notes and 200 billion won from 3.19 percent securities due 2020, according to data compiled by Bloomberg. The refiner plans to use the money for refinancing and funding crude oil purchases, according to a regulatory filing yesterday.
SK E&S raised 200 billion won from five-year 3.05 percent notes and 100 billion won from 3.21 percent bonds due 2020, according to data compiled by Bloomberg. The company plans to use the proceeds to refinance, buy liquefied natural gas and fund an investment in a local terminal for the fuel, it said in an e-mailed response to questions about the funds on Feb. 20.
“The sale was successful because investors appreciated SK E&S’s handsome earnings last year as well as the company’s growth potential,” according to the e-mail.
Hanwha Chemical Corp. (009830) offered 150 billion won of three-year 3.12 percent debt. The chemical maker will use the proceeds for refinancing, spokesman Kwon Hyuk Bum said Feb. 20.
South Korea is likely to achieve 2.8 percent growth, Kim said in an interview in Seoul on Feb. 19. “I bet a little bit more on the upside than the downside,” Kim said. Gross domestic product grew 2 percent in 2012, the slowest pace since 2009, as Europe’s debt crisis and a global slowdown sapped overseas demand for South Korea’s products.
Three-year sovereign notes yielded 2.68 percent yesterday, the lowest in Bloomberg-compiled data going back to 2000. The extra yield investors demand to own Korean company notes over similar-maturity government debt has narrowed to 34 basis points from 80 basis points a year ago.
The won fell 0.2 percent to 1,088.36 per dollar at 10:26 a.m. in Seoul, according to data compiled by Bloomberg. The currency has gained 4.4 percent in the past six months, the second-best performer in Asia.
Offerings this year have fallen 54 percent to 5.43 trillion won from 11.68 trillion won in the same period of 2012, the data show.
Hite Jinro Co. (000080) and Lotte Himart Co. are among companies planning to sell won-denominated debt, according to preliminary data compiled by Bloomberg.
*T Top Five Underwriter Rankings Year to Date
Company Market Share Amount in Won KB Investment & Securities Co. 24.7% 1.34 trillion Woori Investment & Securities Co. 19.2% 1.04 trillion Korea Investment & Securities Co. 17.6% 958.12 billion Hyundai Securities Co. 6.5% 353.35 billion Daewoo Securities Co. 5.2% 285.00 billion *
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