LS, the holding company of LS Group (006260), explored raising funds from Japanese investors for the first time in its history. Based on a credit rating obtained from Japan Credit Rating Agency (JCR), the company reviewed issuing yen-denominated bonds, known as samurai bonds. While the plan has reportedly been shelved for now, LS has secured a channel to draw in Japanese capital at low cost, leaving open the possibility of a future issuance.
According to investment banking (IB) industry sources on the 21st, LS had until recently weighed the option of issuing bonds targeting local Japanese investors. Issuing yen-denominated bonds requires a credit rating applied locally in Japan, and LS said the previous day that it had secured an "A0, stable" rating from JCR. "We reviewed a yen bond issuance until recently, but there are no plans to issue at present," an LS official said.
The market described LS's review of yen funding as unusual. Excluding LS Electric, the group's business in Japan was not large in scale, and it had no separate yen-denominated borrowings, meaning there was no refinancing issue. Unlike the early 2000s, when companies such as LS Cable & System and SK Telecom competed to issue yen bonds, there is virtually no recent track record from major conglomerates to reference.
Still, with yen interest rates remaining at their lowest levels, the group could simultaneously pursue a cost-advantage strategy and diversify its funding channels. Although the Bank of Japan raised its benchmark rate last month from 0.75% to 1%, the impact on the market was small as the move had been largely anticipated. Korean Air and Korea Investment & Securities also successfully issued yen bonds earlier this month. "Because absolute yen rates are so low, companies that have a use for yen funds are the ones mainly reviewing this," an IB industry official said. "They are not taking the approach of raising yen and converting it to secure won."
While the yen bond issuance plan has been shelved, it is assessed that a resumption remains possible depending on future market conditions. With the issuance conditions met, many analysts say securing investment demand would not be difficult, as LS received a higher credit rating than Korea Investment & Securities (A-), which recently sold yen bonds. LS also said it had preemptively obtained the JCR credit rating ahead of dealing with Japanese financial institutions.
