In a strategic move to meet its financial obligations and bolster its capital base, Hyundai Steel has announced plans to issue bonds worth up to 500 billion won by the end of January 2025. Initially contemplating a postponement of this issuance until February, the company has decided to proceed with the bond issuance schedule for this month, maintaining its consistent bond issuance pattern that has been a hallmark of Hyundai Steel's financing strategy since 2007.
Hyundai Steel's latest bond issuance comes at a critical juncture, with a total of 640 billion won in bonds maturing this month alone. The maturities include 60 billion won due on January 17, 160 billion won on January 22, 100 billion won on January 23, and a significant 320 billion won on January 25. The bond issuance is intended to refinance these obligations and support the company's ongoing operations.
The company has selected a consortium of leading investment banks, including KB Securities, NH Investment & Securities, Korea Investment & Securities, and Shinhan Investment Corp., to act as lead underwriters for the bond issuance. The demand forecast for the bond issuance is set to begin on January 14, with Hyundai Steel expecting strong interest from institutional investors, a trend it has relied on for years. The timing of the issuance, coinciding with the start of the year, capitalizes on high investor demand, which typically results in lower interest rates for the bonds.
Hyundai Steel has been a consistent performer in the bond market, maintaining an "AA0, stable" credit rating since 2010. The company’s strong credit rating, coupled with its history of favorable bond demand, enables it to issue bonds at below-market interest rates. In 2023, Hyundai Steel issued bonds worth 200 billion won, receiving a robust order book of 1.805 trillion won, resulting in attractive pricing, including negative spreads of -45 basis points for 2-year bonds, -53 basis points for 3-year bonds, and -70 basis points for 5-year bonds. Similarly, in January 2024, Hyundai Steel issued 300 billion won worth of bonds, with orders totaling 1.7 trillion won, resulting in similarly favorable spreads.
Over the years, Hyundai Steel has issued bonds in the range of 300 billion to 400 billion won each spring, with the amount this year reaching up to 500 billion won. The company’s ability to issue bonds in both the first and second halves of 2024 is a testament to its strong financial position and investor confidence. The issuance of bonds in the second half of 2024 marked the first time since 2021 that the company issued debt in both periods of the year.
This bond issuance is critical not only for managing maturing debt but also for ensuring Hyundai Steel’s continued growth and expansion. With a favorable bond issuance environment and strong demand from institutional investors, Hyundai Steel is poised to navigate the challenges of 2025 with strengthened financial liquidity.
