Corporate fundraising surges 75% in Sept. as bond issuance jumps

Corporate bond issuance surged 77.5 percent last month from the previous month, driven largely by a sharp rise in financial bonds. General corporate bonds, however, posted a net redemption as repayments outpaced new issuance despite an increase in the amount issued.

Corporate bond issuance reached 28.17 trillion won ($21.3 billion) in September, up 12.3 trillion won, or 77.5 percent, from the previous month, according to data the Financial Supervisory Service released Tuesday on direct corporate financing activity in September.

Financial bonds led the increase, with issuance totaling 25.8 trillion won — up 10.98 trillion won, or 74.2 percent, from the prior month. Bank bonds and other financial bonds rose by 5.38 trillion won and 5.6 trillion won, respectively. Among industry segments, commercial banks and credit card companies posted the most notable increases in issuance.

General corporate bond issuance also rose, reaching 1.73 trillion won — up 1.42 trillion won, or 457.7 percent, from the previous month. Repayments exceeded new issuance, however, resulting in a net redemption of 3.19 trillion won. By purpose, refinancing accounted for 1.18 trillion won, or 68.2 percent of the total. By credit rating, investment-grade bonds rated AA or above made up 920 billion won, or 53.2 percent.

Issuance of asset-backed securities fell 14.3 percent, or 107.3 billion won, to 645.1 billion won from the prior month. The total outstanding balance of corporate bonds at the end of September stood at 777.12 trillion won, up 8.27 trillion won, or 1.1 percent, from the end of the previous month.

Commercial paper issuance rose 22.0 percent, or 10.19 trillion won, to 56.44 trillion won from the previous month. Short-term bond issuance also climbed 23.4 percent, or 24.07 trillion won, to 126.89 trillion won.

Equity issuance fell 69.6 billion won, or 15.3 percent, to 385.3 billion won from the prior month. Paid-in capital increases dropped 42.3 percent, or 124.6 billion won, to 169.7 billion won, while initial public offerings rose 34.2 percent, or 55 billion won, to 215.6 billion won. Nine companies listed on the Kosdaq market, three more than the previous month.

Some in the industry doubt that general companies — which have been deferring bond issuance due to the financing burden from rising interest rates — will see their fundraising demand recover before year-end. "If upward pressure on interest rates does not persist as strongly as it has this year, companies that have been putting off corporate bond issuance are expected to gradually return to the market next year, both for new financing and bond refinancing," said Lee Hyun-su, a researcher at Yuanta Securities Korea.