Corporate Direct Financing Drops 38% in a Month... General Corporate Bond Issuance Plummets

"Direct Corporate Financing Performance in August"

Both Stock and Corporate Bond Issuance Decline

General Corporate Bond Issuance Down 88.8%... Net Redemption Trend Confirmed

Last month, the amount of direct financing raised by domestic companies plummeted by nearly 40% in just one month. Both stock and corporate bond issuances decreased, with the decline in general corporate bond issuance being particularly steep—shrinking by nearly 90%. Amid a high interest rate environment, companies continued the trend of repaying existing debt in the corporate bond market rather than raising new funds.

According to the Financial Supervisory Service's report, "Direct Corporate Financing Performance in August," released on September 30, the total public offering of stocks and corporate bonds in August amounted to 16.3311 trillion won, a decrease of 10.0109 trillion won (38.0%) compared to the previous month. Stock issuance stood at 454.9 billion won, down 69.5%, while corporate bond issuance dropped to 15.8762 trillion won, a decrease of 36.1%.

The decline in stock issuance was largely due to the base effect from a large-scale rights offering in July. In August, there were 6 rights offerings totaling 294.3 billion won, representing a decrease of 1.1365 trillion won (79.4%) compared to the previous month. In July, the total amount of stock issuance had increased by more than 1 trillion won due to Hanwha Solutions’ 1.1713 trillion won rights offering.

However, the number of initial public offerings (IPOs) increased. In August, there were 6 IPOs totaling 160.6 billion won, up by 4 cases and 99 billion won (160.7%) from the prior month. All 6 IPOs were listings on KOSDAQ.

A sharp drop in general corporate bond issuance stood out in the bond market. In August, general corporate bond issuance was 310 billion won, a decline of 2.467 trillion won (88.8%) compared to July. Issuances were mainly for refinancing purposes. The entire amount issued was used for repaying existing debt, with no issuances for operating or facility investment purposes. The trend of net redemption of general corporate bonds continued, with a net redemption of 936 billion won in August, marking a continuation from the previous month.

By credit rating, there were no issuances of high-grade bonds. Among unsecured general corporate bonds, there were no issuances rated AA or higher; A-rated accounted for 50 billion won (71.4%), while BBB rated or lower comprised 20 billion won (28.6%). By maturity, short-term bonds accounted for 170 billion won (54.8%) and medium-term bonds for 140 billion won (45.2%), with no long-term bond issuances.

Additionally, the issuance of financial bonds also decreased. In August, financial bond issuance totaled 14.8138 trillion won, down 7.0433 trillion won (32.2%) from the previous month. Issuance of financial holding company bonds dropped to 1.545 trillion won, a decline of 32.4%; bank bonds recorded 6.1894 trillion won, down 14.9%; and other financial bonds totaled 7.0794 trillion won, falling by 42.4%.

On the other hand, asset-backed securities (ABS) issuance grew significantly. In August, ABS issuance totaled 752.4 billion won, up 536.9 billion won (249.1%) from the previous month. In particular, ABS issuance in which general companies were the asset holders reached 561 billion won, an increase of 429.5 billion won (326.6%) compared to July.

Short-term fundraising also declined. In August, issuance of commercial papers (CP) and short-term bonds amounted to 149.0692 trillion won, down 26.105 trillion won (14.9%) from the previous month’s 175.1742 trillion won. CP issuance stood at 46.2474 trillion won, a decrease of 16.5%, and short-term bond issuance totaled 102.8218 trillion won, down 14.2%.

As of the end of August, the outstanding balance of CP and short-term bonds was tallied at 251.797 trillion won and 95.1905 trillion won, respectively.

This content was produced with the assistance of AI translation services.