The latest offering by AA-rated KCC Corp. was coldly received by institutions, drawing just 60 percent in bids, and may have to scale back its debt offering upon confirming skepticism about builders even on investment grade.

The South Korean building and industrial company which set out to raise maximum 400 billion won ($322.5 million) in new debt attracted just 90 billion won for its first offering of 150 billion won worth, according to financial industry sources on Monday.

The desired band was at 20 basis points below and 60 basis points above market average. Its AA- debt yielded at 1.645 percent on May 20. Pricing details were undisclosed.

The undersubscribed share would likely be taken up by the joint book runners Mirae Asset Daewoo and Korea Investment Securities, with Shinhan Investment, Hana Financial Investment, and Hi Investment & Securities in the syndicate underwriting.

State lender Korea Development Bank that has been supporting corporate bond sales did not take part this time.

The tepid demand for KCC bonds comes as a surprise as the company is rated AA-, the fourth highest on credit rating scale, with a stable outlook.

This confirms how investors remain pessimistic towards the construction market, said a market expert.

Hanhwa Construction, a local builder, sought to raise 100 billion won through A-rate bonds but ended up gathering zero bids from institutional investors last Friday.

The government has launched 20-trillion-won bond purchase program but the investor sentiment still remain subdued as investors mostly cherry-pick top-grade debts.

The yield of benchmark three-year government bond ended the day at all-time low of 0.815 percent. It fell further to 0.795 percent Tuesday morning.

By Ahn Gab-seong, Kang Woo-seok and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]