South Korean companies with top-notch credit ratings such as SK Telecom Co. and KT Corp. are returning to the long-term bond market amid rising interest in longer-dated, higher-yielding bonds before widely-expected interest rate cuts next year.
KT, the country’s largest telecom service provider, saw 200 billion won ($142 million) in its new bonds nearly six times oversubscribed in book building on Monday, drawing a total of 1.16 trillion won in demand, according to investment banking sources.
The new bonds, to be issued on Dec. 2, are comprised of 100 billion won in three-year debt; 60 billion won with a five-year maturity; and 40 billion won with a 10-year duration.
The terms of the bonds have not been yet fixed. Buoyed by the strong demand, KT is considering increasing the debt issuance to 300 billion won.
KB Securities Co., NH Investment & Securities Co, Korea Investment & Securities Co. and SK Securities Co. underwrote them.
SK Telecom, the No. 1 mobile carrier in South Korea, will book build 150 billion won for its new bond issuance with three, five and 10-year durations on Dec. 3. It is making a comeback to the domestic bond market in 10 months since February this year.
The two telecom service providers are among a handful of Korean companies with triple-A ratings. Excluding financial services firms, the other Korean companies with the top-notch credit ratings are tobacco maker KT&G Corp., Hyundai Motor Co. and Kia Corp.
The debt sales followed their local peers’ successful long-term bond issues this year.
Last month, S-Oil Corp., a refiner with a double-A rating, sold its first 10-year bonds in several years. It raised a total of 300 billion won in new bonds, which were six times oversubscribed.
It is comprised of 150 billion won, 80 billion won and 70 billion won with three, five and 10-year maturities, respectively.
“Telecom companies are looking to diversity their bond durations as institutional investors are chasing longer-duration debts,” said a corporate finance team official at a leading Korean brokerage company.
By Hyun-Ju Jang
blacksea@hankyung.com
Yeonhee Kim edited this article.
