Jul 18, 2023

The Korea Times Posted : 2023-07-18 16:05 Success of Daol's securities bonds to gauge market sentiments of H2 By Anna J. Park Daol Investment & Securities is planning to issue public corporate bonds for the first time since its establishment in 2008. The move is seen as solidifying the firm's borrowing structure long term. According to the company on Tuesday, it plans to begin a book-building process at the end of this month to figure out demands for its issuance totaling 80 billion won ($63 million). The bonds will be comprised of one-year and 18-month maturities, with the possibility of increasing the issuance amount up to 100 billion won. The target interest rates for the bonds are to be set higher than those of more stable financial institutions, planned at a maximum of 6.9 percent for one-year maturity and 7.3 percent annual interest for the 18-month maturity. Currently, the firm is assigned a credit rating of A, or Stable, by Korea Ratings. Since the foundation of KTB Investment & Securities, the former entity of the brokerage unit of Daol Financial Group in 2008, it is the first time that it will increase capital through a public offering. The company has so far used to attract capital from private placement offerings. Earlier this year, Daol Investment & Securities issued 45 billion won worth of private placement bonds. Change in the issuance method is attributed to the company's intention to stably extend the maturity of its borrowing structure through long-term corporate bonds. The firm aims to replace short-term borrowings, such as commercial papers and electronic short-term bonds, with relatively longer-term public bonds. By doing so, Daol seeks to strengthen its long-term borrowing capabilities and potentially reduce refinancing risks. However, the firm needs to overcome the remaining negative market sentiment over bonds issued by securities firms. Securities bonds are preferred less, due partly to their exposures to real estate project financing (PF) as well as outstanding receivables related to Contract for Difference (CFD) amid stock market manipulation schemes earlier this year. The fact that Daol Investment & Securities underwent a major restructuring process, following a liquidity challenge amid last year's real estate PF crisis, also partially explains investors' lingering uncertainty about the company. Market watchers say the success of the firm's public bond issuance will be a gauge to check the investment sentiment for securities bonds in the second half of this year.