The coronavirus pandemic has begun to stifle funding-raising for state lenders and large companies in South Korea.
Export-Import Bank of Korea (EXIM Bank) has raised $1.02 billion by issuing commercial papers (CPs) in foreign currencies. It took the policy bank whose offering usually draws overwhelming demand three days to sell - $300 million in six-month CPs on March 19; $300 million in nine-month CPs and $20 million in six-month CPs on March 20; and $400 million in nine-month CPs on March 23.
An EXIM Bank official said the CP issuance took longer than expected due to tepid investor demand amid growing fears for economic recession from the rapid spread of coronavirus. The bank’s main target for the latest CP issue was European institutional investors.
Foreign currency-denominated commercial paper is a short-term debt issued by a high-rated financial institution or a company in overseas financial markets.
Amid sluggishness in the stock and debt market, big companies are turning to banks to raise funds.
The outstanding loan extended by Korea’s five major banks – KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup – to major companies came to $78.7 trillion won ($62.5 billion) for the first 20 days of March, up 1.8 trillion won from the end of February, according to data from the banks on Tuesday.
The increase over the 20-day period more than doubles 788 billion won added in the entire month of February.
Market experts described such increase is very unusual for large companies as they usually rely more on direct financing like bond issue.
The rare spike in outstanding bank loans to large companies is largely owed to an increased in borrowing from their overdraft accounts. “Companies, regardless of industry sector, are borrowing on the line of credit to secure liquidity,” tipped a Hana Bank official.
According to the Korea Financial Investment Association, 6.5 trillion won in corporate bonds are due to mature before the end of April, the highest for the month since such data has been tracked from 1991.
By Yang Yeon-ho and Cho Jeehyun
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