Debt sale by South Korean companies has slowed in the end of the year after the Bank of Korea last month raised the benchmark interest rate for the first time in more than six years, raising borrowing costs.

According to multiple sources from the financial investment industry on Monday, Halla Group, engaged in auto parts, construction, and property development businesses, has decided to put off its initially planned book building session this week for its 60 billion won ($55.2 million) debt sale. It will closely monitor the market conditions before it renews the sale originally planned this month. The company has not yet decided when it would sell the corporate bonds, said an unnamed official at Halla Group.

The company’s decision to hold off the planned debt issuance comes after the country’s central bank last month hiked the base rate by a quarter of a percentage point to 1.50 percent from the record low of 1.25 percent kept since June last year on the country’s resilient economic recovery. The last time the interest rate was raised was in June 2011.

A majority of companies have also already issued corporate bonds in October ahead of the much anticipated rate hike to avoid a rise in borrowing costs.

As Halla Group decided to put off its bond sale, no additional company is expected to hold a book building session this month. Jeju Bank last week tapped demand from institutional investors, becoming the last company that has carried out a book building session before the end of this year.

Lim Jung-min, an analyst at NH Investment & Securities Co., said that with treasury rates rising until mid-October, most companies have refrained from scheduling book building sessions in December. After investors have turned passive towards the year end, companies are also shunning debt sale this month, Lim added.

Industry insiders also noted that companies pin high hopes on a possible rise in their credit grading after corporate credit evaluation scheduled for later this month.

Lim also said a number of companies are expected to see a rise in their credit rating and outlook during this month’s evaluation thanks to steady improvement in earnings. A company with a higher credit rating generally attracts more investors than does a company with a lower grading. NH Investment & Securities projected that Naver Corp., SK Hynix Inc., Hanwha Chemical Co., Yuanta Securities Co., Aju Corporation Co., and Hansol Technics Co. would get a credit rating upgrade.

By Chun Gyung-woon and Lee Eun-joo

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