Short-term borrowing by listed Korean companies has risen by more than 40 trillion won this year alone. Analysts attribute the increase to a widening spread between short- and long-term interest rates, as surging international oil prices in the wake of the war between the United States and Israel fueled inflation concerns. Experts agreed that a sustained rise in short-term debt could translate into financial risk for companies.
According to financial information provider FnGuide on the 24th, short-term borrowing at 2,518 listed Korean companies totaled 439.6475 trillion won in the first quarter of this year on a consolidated basis. That marked an increase of 40.6911 trillion won, or 10.2%, in a single quarter from 398.9563 trillion won at the end of last year. In the first quarter, there were 37 disclosures of decisions to increase short-term borrowing on the Korea Composite Stock Price Index (KOSPI) alone, nine more than the 28 recorded in the first quarter of last year.
Over the same period, short-term borrowing at Samsung Electronics (005930.KS) rose 11.2% from 17.5750 trillion won to 19.5463 trillion won, while SK hynix (000660.KS) saw a 5.3% increase from 2.3958 trillion won to 2.5223 trillion won. Among major Korean listed companies, Naver (035420.KS) recorded the largest increase, surging more than 17-fold from 132.2 billion won at the end of last year to 2.3262 trillion won in the first quarter of this year.
Short-term borrowing typically increases by a minimum of 20 trillion won to a maximum of more than 60 trillion won over a full year, but this year the figure rose by more than 40 trillion won in just one quarter. In fact, last year saw an increase of 27.7790 trillion won, less than the first quarter of this year. In 2024, it rose 64.0139 trillion won over the full year.
Analysts say listed companies have increased short-term borrowing this year because of rising international oil prices and growing inflation concerns. As inflationary pressure mounts worldwide and global central banks signal the possibility of rate hikes, the spread between short- and long-term interest rates has widened, prompting companies to opt for short-term borrowing, according to the explanation. In addition, many observers view the prolonged interest rate uncertainty as driving companies to raise funds through commercial paper (CP) and short-term electronic bonds instead of issuing corporate bonds.
With a high exchange rate also weighing in, there is a mood among companies to increase short-term borrowing to more easily secure working capital. In particular, companies facing weak business conditions have found long-term financing difficult, which has also had an impact. CJ CGV raised short-term borrowing in February and March of this year, securing 50 billion won and 400 billion won respectively at the time, both of which were used to repay previously issued CP.
Experts expressed concern that for companies enduring prolonged business slumps, a rise in short-term debt could escalate into a liquidity crisis. Kim Beom-jun, a professor of accounting at the Catholic University of Korea, noted, "An increase in short-term borrowing is difficult to view as a good sign. Given the potential for liquidity risk, it can be interpreted as a growing financial risk."
