More companies are likely to have difficulty in raising funds by issuing commercial paper or bonds, as a huge portion of investors pull their investment out of the corporate bond market in the wake of a liquidity crisis among some conglomerates.
Over the past year, business groups such as Tong Yang, STX and Woongjin undermined retail investors for an insolvent financial status.
Investors for CPs and bonds issued by the three conglomerates are estimated to have faced collective losses of some trillion won.
The frozen corporate bond market is aggravating the financial status of some conglomerates with relatively high debt-to-equity ratios as well as putting the brakes on their fund-raising activities.
According to chaebul.com, bonds totaling 28.9 trillion won ($26.2 billion) issued by Korea’s 30 major conglomerates are scheduled to mature between the fourth quarter of 2013 and the fourth quarter of 2014.
Among them, the business groups will see their bonds worth 9.7 trillion won mature by the end of this year.
SK topped the list in holding maturing bills before 2015 with 3.1 trillion won, followed by Hanjin with 2.5 trillion won, Lotte with 2.2 trillion won, Hyundai Motor with 1.8 trillion won, Doosan with 1.7 trillion won and STX with 1.6 trillion won.
While some big conglomerates with financial soundness still have a variety of chances in raising operating funds, more and more investors are declining to purchase CPs and bonds issued by groups that face increasing uncertainty.
The nation’s largest private money-lending market in Myeong-dong, downtown Seoul, had been famous for trading corporate bills as loan sharks offered high interest rates.
The private lenders, however, are shunning deals with bills with high risk amid low demand among investors, according to the financial investment industry.
Some argue the situation is inviting double difficulty to the conglomerate sector, saying their profitability is not favorable this year.
According to the Korea Listed Companies Association, 79 publicly traded units owned by the 10 major conglomerates saw their collective operating profit come to 24.3 trillion won during the first half, down 4.1 percent from 25.3 trillion won in the same period last year.
STX Group’s other main units such as STX Offshore & Shipbuilding, STX Heavy Industries and STX Engine were hit hard by the global shipbuilding industry’s long slump, caused by the global economic slowdown and eurozone debt crisis.
Woongjin Chemical’s parent Woongjin Holdings has been under court receivership since last October because of debt problems.
Tong Yang Group’s five nonfinancial units filed for court receivership earlier this month. About 46,000 retail investors, who invested in CPs and bonds issued by the firms, are assumed to have suffered collective losses of an estimated 2.3 trillion won.
By Kim Yon-se (
kys@heraldcorp.com)
