Daewoo and GS Energy biggest issuers of bonds

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Daewoo and GS Energy biggest issuers of bonds

GS Energy and Daewoo International led the busiest week of issuance by Korean companies in 24 weeks as borrowing costs remained at near-record lows.

Sales of won-denominated notes rose to 1.99 trillion won ($1.8 billion), more than double the weekly average for this year of 900 billion won and the most since the seven days ending Sept. 23, according to data compiled by Bloomberg. Yields on three-year corporate notes rated at AA- averaged 3.01 percent, close to a record low of 2.97 percent on March 5, according to data from the Korea Financial Investment Association going back to 2000.

Companies in Asia’s fourth-largest economy are issuing debt as President Park Geun-hye, who took office last week, seeks to revitalize a nation saddled with record household debt and facing a widening income gap. Bank of Korea Governor Kim Choong-soo said in an interview last month that an improved global outlook may help the country expand more than forecast this year, a signal that further monetary easing isn’t necessary for now.

The “debt sale environment is pretty good now, with rates at a very low levels,” said Lee Jong-myung, a credit analyst at Hanwha Investment & Securities. “But investors’ interest is mostly focused on companies with high credit ratings and recovering industries.”

GS Energy, a unit of GS Holdings, sold 400 billion won of bonds, including 300 billion won of 3.66 percent notes due March 2023, according to data. The company said it plans to use the proceeds to redeem commercial paper and to invest in oilfield projects, according to a Feb. 28 filing.

Daewoo International, whose parent Posco, Asia’s third-biggest steelmaker by output, is rated Baa1 by Moody’s Investors Service and raised 300 billion won in a two-part offering split equally between 2.92 percent notes due in March 2016 and 3.09 percent bonds due in March 2018, the data show.

The trading and investment company that exports and imports steel to automobile parts plans to use part of the sale proceeds to invest in a gas project in Myanmar, said Lee Bong-ju, a company spokesman. “We thought the timing was good because borrowing costs remain low,” said Lee.

Samsung C&T also borrowed 300 billion won via sales of three-year 3.02 percent securities and five-year 3.17 percent notes, the data show.

The builder of power plants, bridges and residential apartments plans to use the money as working capital, said company spokesman Lee Sang-hyun, without providing further details.

Three-year sovereign notes yielded 2.66 percent March 7 compared with a record low of 2.63 percent first touched Feb. 27 and an average of 3 percent over the past 12 months. The extra yield investors demand to own Korean company notes over similar-maturity government debt has narrowed to 35 basis points from 81 basis points a year ago.

“I bet a little bit more on the upside than the downside,” Kim said, adding that domestic liquidity is “abundant” and globally, “the whole mood is improving.”

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 Korea’s products.

The currency has gained 2.61 percent against the greenback over the past year, making it the second-best performer of 16 major currencies tracked by Bloomberg.

STX Engine, which develops and manufactures marine diesel and military engines, plans to price bonds in coming days.


Bloomberg

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