South Korea's top 10 conglomerates excluding Samsung Group reduced their corporate bond balances by 6.3 trillion won this year, according to KOSCOM CHECK data. The decline reversed last year's 5.6 trillion won increase and reflected rising borrowing costs that pushed companies toward bank loans and self-repayment. AA- grade 3-year corporate bond rates climbed 117.7 basis points during the period, reaching 4.653% by end of July from 3.476% at year-end. The shift occurred as US-Iran war tensions drove oil prices higher and rekindled inflation concerns in March, causing market interest rates to surge.
Samsung Group Increases Bond Balance 20.1% to 23.1 Trillion Won
Samsung Group's corporate bond balance reached 23.1 trillion won, marking a 20.1% increase from 19.2 trillion won at year-end. The growth rate more than doubled compared to last year's 1.88 trillion won increase during the same period. Samsung Card showed the largest increase among subsidiaries with 2.37 trillion won in additional balance. Samsung SDS, which had no issuance last year, recorded 1.22 trillion won in new balance. Samsung Securities and Samsung Heavy Industries added 440 billion won and 225 billion won respectively.
SK Group Reduces Bond Balance by 4 Trillion Won
SK Group's corporate bond balance fell from 43.1 trillion won to 39 trillion won, a decrease of 4 trillion won that represented the largest reduction among major conglomerates. The decline contrasted with last year's 1.34 trillion won increase during the same period. SK Hynix showed the steepest drop within the group, reducing its balance from 4.46 trillion won to 3.46 trillion won. SK Enmove's entire 900 billion won balance disappeared. SK Telecom, SK Energy, SK Geocentric, and holding company SK also recorded reductions of 820 billion won, 470 billion won, 370 billion won, and 365 billion won respectively.
Corporate Bond Issuance Falls 31.5% in First Half
First-half general corporate bond issuance totaled 25.9 trillion won, down 31.5% from 37.8 trillion won a year earlier, according to Financial Supervisory Service data. The figure approached the 21.8 trillion won issued in first-half 2022, when high-intensity interest rate hikes began. Facility investment-purpose issuance dropped 11% to 920 billion won, falling below 1 trillion won for the first time on record. Three-year government bond yields rose from 2.953% at year-end to 3.959% by end of July.
Bank Loans to Large Corporations Rise to 25.5 Trillion Won
Bank lending to large corporations increased 25.5 trillion won in the first half, comprising 12 trillion won in first quarter and 13.5 trillion won in second quarter, Bank of Korea data showed. The total already exceeded last year's full-year increase of 20.4 trillion won. A Korea Chamber of Commerce and Industry survey of 204 non-financial companies found 43.6% relied on commercial bank borrowing as their primary funding source, while 19.6% used corporate bond issuance. Multiple banks exhausted substantial portions of their annual corporate lending quotas in the first half.
66.7 Trillion Won in Bonds Mature Through End of Next Year
The top 10 conglomerates face 66.7 trillion won in bond maturities from second half through end of next year. Second-half maturities total 19.1 trillion won, while next year's maturities reach 47.5 trillion won, with 17.9 trillion won concentrated in first quarter. Hyundai Motor Group leads with 21.7 trillion won in upcoming maturities, followed by SK Group at 12.4 trillion won, Samsung at 8.18 trillion won, and Lotte at 7.73 trillion won.
FAQ
Why did South Korean conglomerates reduce corporate bond issuance this year?
Companies reduced bond issuance due to rising borrowing costs in bond markets. AA- grade 3-year corporate bond rates increased 117.7 basis points to 4.653% by end of July from 3.476% at year-end, making bond financing more expensive than bank loans.
How much did Samsung Group's bond balance increase?
Samsung Group's corporate bond balance increased 20.1% to 23.1 trillion won from 19.2 trillion won at year-end. This growth rate was more than double last year's increase of 1.88 trillion won during the same period.
What amount of corporate bonds will mature for the top 10 conglomerates?
The top 10 conglomerates have 66.7 trillion won in bonds maturing from second half through end of next year, with 19.1 trillion won in second half and 47.5 trillion won next year.
