Firms to raise over $30 billion overseas

By Kang Seung-woo

Korea’s financial institutions and firms will be required to borrow more than $30 billion (34.24 trillion won) from abroad this year to pay off or refinance expiring bonds, a state-run think tank said Wednesday.

Financing conditions are seen to be worsening, forcing major players including the Korea Gas Corp., Export-Import Bank of Korea (Eximbank Korea) and Samsung Electronics to seek funds from overseas.

According to the Korea Center for International Finance (KCIF), foreign currency denominated bonds that are due to mature in 2012 amount to $26.6 billion, which translates to a monthly average of $2.2 billion.

Considering working capital demands, firms are estimated to need at least $30 billion, the KCIF said.

Except for 2008, when the global financial crisis triggered a worldwide credit crunch, Asia’s fourth-largest economy has seen the amount bonds offered overseas by companies on a steady rise, reaching $29.7 billion last year.

As more than half of the overall maturing bonds, $14 billion, are scheduled to expire in the first half and national bonds issued by Italy and Spain, linchpins of the European financial turmoil are slated to mature between February and April, domestic players may find trouble in increasing fresh overseas borrowing if they all scramble to concurrently secure fresh funding from the same areas.

Market watchers say that the ongoing eurozone concerns will be a stumbling block for local companies to raise capital overseas.

“Due to a massive downgrade in the eurozone and Greece’s failure in negotiations with private creditors to avoid becoming the first euro nation to default, the crisis in the area is looming larger and it may end up with a credit crunch,” said Kim Yun-kyung, the head of bonds at the KCIF.

“Local firms need to completely map out strategies for offshore bond sales that diversify funding sources.”

Global credit appraiser Standard & Poor’s (S&P) cut the credit ratings of nine eurozone countries including France last Friday, citing their lackluster efforts to fight the spreading potential for a financial crisis.

As for Greece, the epicenter of the current crisis, its government has talked with its private creditor about a bond swap deal required to avoid a catastrophic bankruptcy.

Meanwhile, the Financial Supervisory Service said earlier this week that local lenders increased fresh overseas borrowing in efforts to brace for worsening external uncertainties.

A total of 16 local banks refinanced 120.3 percent of their maturing short-term foreign debt through fresh borrowing last month, compared with 95.9 percent in November.