SeAH Steel (306200) secured orders worth 240 billion won, three times its target amount, in a demand forecast for a corporate bond issuance. Analysts said the company performed well on the back of improving earnings, even as investor sentiment toward non-prime corporate bonds rated A or below has broadly cooled following successive court receivership filings by JR Global REIT and JoongAng Group affiliates.
According to the investment banking industry Tuesday, SeAH Steel conducted a demand forecast targeting institutional investors to raise 80 billion won in corporate bonds. Institutions bid on orders worth 240 billion won, three times the offering amount. Specifically, the two-year tranche drew 185 billion won against a 40 billion won target, while the three-year tranche attracted 55 billion won against a 40 billion won target.
With stronger-than-expected buying interest, the interest rate is also expected to be set at more favorable levels than initially projected. Ahead of the demand forecast, SeAH Steel set its target rate band by adding minus 30 to plus 30 basis points (1 bp = 0.01 percentage point) to its individual fair market yield (the company's specific rate assessed by private bond valuation firms). The demand forecast showed that both the two-year and three-year tranches filled the offering at levels 5 bp below the fair market yield for the same maturity.
Given the recent chill in investor sentiment toward non-prime corporate bonds, analysts said the company performed well. JR Global REIT and JTBC, which had frequently tapped the corporate bond market, filed for court receivership in succession, putting non-prime grade bonds within the affected range. However, SeAH Steel is a core affiliate of the SeAH Group, and investors who had confirmed the improvement in first-quarter net profit this year are believed to have mainly flocked to the bonds.
SeAH Steel has set a policy to use the funds raised through this public bond issuance for debt repayment. The funds are intended to repay 50 billion won in public corporate bonds maturing in October and December this year, and a 30 billion won loan borrowed from the Korea Development Bank (KDB). As the company said it would keep open an increase limit of up to 160 billion won depending on the demand forecast results, the possibility of an expanded fundraising size is also being discussed. Meanwhile, the public bond issuance was lead-managed by NH Investment & Securities, Korea Investment & Securities, and KB Securities.
