Hyundai Transys Takes on KRW 250 Billion Public Corporate Bond Issue [fn Market Watch]

[Financial News] Hyundai Transys is preparing to issue up to KRW 250 billion in publicly offered corporate bonds. With interest rates continuing to rise, a large portion of its corporate bonds is due to mature early next year. The company is also facing continued funding needs for investment in production lines for its next-generation hybrid transmission, TMED-II. The move is understood to be aimed at securing refinancing funds in advance.
According to the investment banking (IB) industry on the 18th, Hyundai Transys will conduct a demand forecast for corporate bonds worth KRW 150 billion in total on the 30th.
The offering comprises KRW 60 billion in two-year bonds and KRW 90 billion in three-year bonds. If demand is strong, the issue size may be increased to as much as KRW 250 billion. The bonds are scheduled to be issued on the 12th of next month, with a pricing guidance range of -30 to +30 basis points versus the individual issue's evaluated market yield.
This will be Hyundai Transys's first issuance in about eight months since January. The key concern is the concentration of maturities early next year. Hyundai Transys has approximately KRW 450 billion in corporate bonds maturing next year, of which about KRW 280 billion is concentrated in January and February. The company is understood to be seeking to secure refinancing funds in advance by leveraging its 'AA-' credit rating before market interest rates rise further. All proceeds will be used to repay debt.
The burden of capital expenditures is also continuing. According to NICE Credit Rating, Hyundai Transys's free cash flow (FCF) stood at negative KRW 243.4 billion in 2023, negative KRW 335.4 billion in 2024, and negative KRW 248.5 billion last year, followed by negative KRW 262.1 billion in the first quarter of this year. The decline was driven by concentrated investments in its United States plant and TMED-II lines. Total borrowings also increased from KRW 2.3841 trillion at the end of 2023 to KRW 3.3455 trillion at the end of March this year.
Sejin Hong, a senior research analyst at NICE Credit Rating, analyzed, "Free cash flow generation is expected to remain limited as high investment burdens persist in the short term, including investments in TMED-II lines in South Korea and overseas." However, Hong assessed, "The pace of borrowing growth is expected to gradually slow over the medium term, and sound financial stability is expected to be maintained given the continued generation of profits and the expansion of the capital base."
Liquidity remains sufficient. As of the end of March this year, cash and cash equivalents stood at KRW 1.3208 trillion, slightly exceeding short-term borrowings of KRW 1.3102 trillion. The company has also secured approximately KRW 2 trillion in undrawn credit facilities.
Hyundai Transys's corporate bond credit rating is 'AA-, stable.' Affiliates of Hyundai Motor Group hold approximately 99% of the company's shares. NICE Credit Rating has assigned a rating one notch higher than Hyundai Transys's standalone credit profile, reflecting the potential for support from the group.

[email protected] Kim Hyun-jung Reporter