Daishin Securities Raises 1.6 Trillion Won in Corporate Bonds Instead of Rolling Over Short-Term Debt [fn Market Watch]

[Financial News]  Daishin Securities has attracted nearly 1.6 trillion won in institutional demand in the corporate bond market. Beyond simply raising funds, the firm is also seen as having succeeded in lowering its short-term financing burden by refinancing commercial paper (CP) nearing maturity with corporate bonds.
According to the investment banking industry on the 1st, Daishin Securities secured orders totaling 1.59 trillion won in a demand forecast for a 150 billion won bond issue held that day. That was more than 10 times the initial offering size.
The two-year tranche, which sought 70 billion won, drew 820 billion won in orders, while the three-year tranche, offered at 80 billion won, received 770 billion won. Strong institutional demand also helped Daishin Securities secure favorable borrowing costs. Based on the offering size, the spread was set at minus 10 basis points for the two-year bond and minus 11 basis points for the three-year bond versus the individual market benchmark yield.
Given that the desired yield range was set at plus or minus 30 basis points from the individual market benchmark, both maturities were funded at rates below market levels.
Buoyed by the strong response, Daishin Securities left room to increase the issue size by up to 300 billion won. The lead managers are KB Securities, NH Investment & Securities, Korea Investment & Securities, Shinhan Investment & Securities, and Samsung Securities.
What stands out in this issuance is how the proceeds will be used. Daishin Securities plans to use all of the funds to repay 150 billion won in CP maturing after the 10th. By replacing short-term CP with two- to three-year corporate bonds, the company will extend the maturity profile of its debt.
The bond market also sees significance in the fact that institutional demand for AA- rated securities firms has been confirmed.
In particular, the fact that both the two-year and three-year tranches were fully subscribed at levels below the market benchmark suggests that Daishin Securities' funding conditions have improved further.
An official in the investment banking industry said, "Among securities firm bond issues, institutional funds are concentrating on issuers with solid financial performance and credit quality." The official added, "For Daishin Securities, this can be seen as a deal that improved both funding stability and cost efficiency by replacing short-term CP with longer-term corporate bonds."
Earnings also supported investor sentiment. Daishin Securities posted 359.9 billion won in operating profit on a consolidated basis in the second quarter of this year, more than tripling from 102.5 billion won in the first quarter.


[email protected] Kim Kyung-a Reporter