DS Investment & Securities Co., Ltd. Raises 10 Billion Won at 5.35%... Chooses Private Placement Bonds Before Interest Rates Rise Further [fn Market Watch]

[Financial News] DS Investment & Securities Co., Ltd. is raising 10 billion won in the private bond market, accepting an interest rate in the mid-5% range. This move is interpreted as a preemptive measure to secure liquidity with a relatively short maturity, amid growing upward pressure on securities firms' funding costs as domestic and international long-term interest rates have recently risen sharply.
According to the financial investment industry on the 29th, DS Investment & Securities Co., Ltd. decided the previous day to issue 10 billion won worth of its second series of unregistered, unsecured private placement bonds. The maturity is March 29, 2028, or one year and six months, with a fixed annual interest rate of 5.35%. Interest will be paid through discount issuance.
What stands out in this fundraising is the combination of the interest rate and maturity. Rather than tying up funds in a long-term instrument, the company chose one-and-a-half-year private placement bonds while accepting a funding cost of 5.35%. This can be interpreted as securing the liquidity it needs first, in anticipation of the possibility that market interest rates may rise further.
In fact, the recent financing environment in the bond market has also been challenging.
By mid-June, the yield on three-year unsecured AA-rated corporate bonds had already risen to 4.348%, while BBB- yields exceeded 10%, indicating widening differences in funding costs by credit rating. Observers in the bond industry said that rising interest rates, combined with certain credit events, could further tighten financing conditions for issuers with relatively lower credit ratings.
In particular, given that the effects of the recent surge in long-term interest rates in the United States are spreading to the domestic bond market, DS Investment & Securities Co., Ltd.'s latest issuance can be viewed as an effort to raise short-term funds before interest rates rise further. Choosing private placement bonds instead of publicly offered bonds also has the advantage of securing funds relatively quickly without a demand forecasting process.
"With interest rate volatility increasing, small and midsize securities firms may choose to secure the liquidity they need first by opting for shorter maturities rather than pursuing long-term funding," an IB industry official said. "This is a time to consider not only the funding rate itself but also the future direction of interest rates and refinancing conditions."
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