By Kim Yoo-chul
Samsung Group affiliates are rushing to issue corporate bonds to secure funds for future investment at lower costs by capitalizing on low interest rates.
Credit analysts and Samsung’s financial officials said that the group will issue corporate bonds worth up to 1 trillion won by this month.
"Because we believe the central bank will boost the local economy by maintaining a low interest rate policy, we are issuing more corporate bonds,’’ said an official at Samsung SDI, the battery-making unit of the group, Friday.
On Feb. 7, the central bank froze its key interest rate at 2.75 percent for the fourth consecutive month.
Market experts said that for companies with credit ratings of AA minus or higher, it is the right time to raise funds on the bond market.
Samsung SDI plans to issue 200 billion won in bonds with a three year maturity, while Samsung Fine Chemicals ― the petrochemical affiliate of the group ― is set to issue 100 billion won with a five year maturity.
"By raising that amount of money, we will invest in facilities for our future businesses,’’ said SDI spokesman Seo Hae-su. SDI plans to heavily invest in solar cells and rechargeable batteries for electric vehicles ― the two business segments that it identified as its next cash-cows.
By September last year, SDI’s debt ratio was 34.2 percent, which means it has solid financial structure. It also has a strong client base as the company sells specialized small-sized batteries to Apple, Samsung Electronics, Dell, Nokia and Hewlett-Packard.
With SDI, Samsung Fine Chemicals doesn’t see any big hurdle to issuing bonds with low interest rates. According to the company, its debt ratio as of the end of third quarter of last year was 42.5 percent.
"Amid the bearish market outlook for solar-related industries, the bond issuance is regarded as a barometer to gauge the impact of the Samsung brand,’’ said Kim Ki-myung, a credit analyst at Korea Investment.
Hotel Shilla, a hotel affiliate led by Samsung Chairman Lee Kun-hee’s oldest daughter Lee Boo-jin, issued 200 billion won in bonds with a five-year maturity, last week. Samsung Total also sold 200 billion won worth with a three-year maturity.
Samsung C&T, a trading and construction arm of the group, is also mulling issuing bonds worth 300 billion won with a three-year maturity, according to company officials.
"Amid the low interest rates trend, many affiliates have a stronger appetite to issue corporate bonds by utilizing their stable credit ratings,’’ said another official.
The coupon rate for Samsung Total’s corporate bonds was a 2.87 percent, which is a historic low. The rate for Hotel Shilla’s corporate bonds was 3.09 percent, while banks’ interest rates were reaching 6 percent.