2023-06-06 21:12:05
An apartment complex in the Gangnam area seen from Lotte World Tower Seoul Sky in Songpa-gu, Seoul. (Photo = Newsis)
[뉴스토마토 김성은 기자] Construction companies are scrambling to issue corporate bonds, but investor sentiment toward the construction industry is still cold. Since it is difficult to raise funds with public bonds unless it is a large construction company with high creditworthiness, the trend is to turn to private bonds.
According to the Korea Securities Depository Securities Information Portal on the 7th, Hanyang (BBB+) issued a total of 67.5 billion won in private debt last month alone. Of these, 18 billion KRW 1-year bonds and 15 billion KRW 1.5-year bonds are green bonds with interest rates of 7.5% and 7.8% per annum, respectively. 17.5 billion won was issued as primary collateralized bond securities (P-CBO) with an interest rate of 4.967%. The remaining 17 billion won is general private debt with an interest rate of 8.5%.
P-CBO is a type of securities issued with support from the Korea Credit Guarantee Fund. As credit reinforcement takes place, it is possible to obtain relatively low interest rates.
On the 30th of last month, KCC Construction (A-) took out private debt of 17 billion won through P-CBO. At an annual interest rate of 6.353%, it was higher than the 20 billion won interest rate (5.757%) of the P-CBO issued in February.
Previously, in April, demand for public bonds worth KRW 90 billion was predicted, but purchase orders were only KRW 13 billion. The shortfall was filled by the acquisition of KDB Industrial Bank and securities firms. The interest rate was set at 7.005% per annum, the upper end of the desired interest rate.
DL Construction (A-) issued private bonds worth KRW 30 billion (interest rate 6.4-6.5%), and POSCO E&C raised KRW 130 billion (interest rate 5.26%) with private bonds.
In addition, through P-CBO, Dongwon Construction Industries secured KRW 45 billion and SK Eco Plant secured KRW 17 billion. HL D&I Halla (7 billion won) and Dongbu Construction (3 billion won) also issued private bonds.
Construction site in Seoul. (Photo = Newsis)
The reason why construction companies are issuing private bonds is that construction companies are not using their power in the public bond market.
Of the 134 construction industry corporate bonds issued through the last 5 days this year, only 11 were public bonds. Everything else is private debt.
Of the 11 public offerings, only 6 had orders exceeding the offering amount in demand forecasting. These include SK Eco Plant (A-), Hyundai E&C (AA-), and GS E&C (A+). All of them are large construction companies with relatively high credit ratings compared to other construction companies.
In February, SK Eco Plant received a demand forecast for public bonds worth 100 billion won, and as a result, 508 billion won rushed in, increasing the issuance to 200 billion won. In the same month, Hyundai Engineering & Construction raised 320 billion won to raise 150 billion won and issued an increased amount to 170 billion won, and GS E&C, which issued 150 billion won public bonds, recorded an order amount of 219 billion won.
On the other hand, Lotte E&C, which issued public bonds worth 250 billion won in January this year, had only 40 billion won in orders in last year’s demand forecast. 120 billion won is a bond market stabilization fund (capitalization fund) created to support companies, and 90 billion won was successfully issued bonds through the acquisition of Korea Development Bank.
Shinsegae Construction, including KCC Construction, which conducted the most recent public bond demand forecast last April, also had difficulties in raising funds, receiving an order of 10 billion won for an 80 billion won offer.
As the real estate market continues to stagnate and the construction industry faces a crisis due to rising atomic ash prices, the financing window for construction companies is also narrowing.
Kim Hyeon-soo, a researcher at Yuanta Securities, said, “This year’s issuance of corporate bonds in the construction industry has worsened overall conditions, such as demand forecasting competition rate and issuance rate,” and cited “the credit quality of construction companies that can relieve anxiety in the market” as the key to financing.
He predicted, “Considering the difficulty in resolving unsold units in a short period of time, the burden of high construction costs, and concerns about project financing (PF) guarantees, the financing environment for construction companies will not be easy for the time being.”
Reporter Seongeun Kim [email protected]
This article was finally confirmed and corrected by Kang Young-kwan, Director of Industry 2, in accordance with the News Tomato Reporting Rules and Code of Ethics.
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