[E-Daily Marketin Reporter KIM YEON-SEO ] Hana F&I, an investment firm specializing in non-performing loans (NPLs), is set to issue corporate bonds worth up to 300 billion won. As its operating assets and revenue base have expanded thanks to the growing NPL market, the company is restructuring its funding mix by reducing its reliance on commercial paper (CP) and increasing its issuance of corporate bonds.

According to the investment banking (IB) industry on the 14th, Hana F&I will conduct a bookbuilding process targeting institutional investors on the 27th for the issuance of a total of 150 billion won in public corporate bonds.

The tranches (maturities) are structured with relatively short terms: 1.5 years, 2 years, and 3 years. The target yield band for all three tranches is set at -30 to +30 basis points (bps; 1 bp = 0.01 percentage points) relative to the ratings from independent private bond rating agencies.

Depending on the results of the bookbuilding, the company plans to increase the issuance amount to a maximum of 300 billion won. NH Investment & Securities, KB Securities, Korea Investment & Securities, and Shinhan Investment & Securities are serving as lead underwriters. The scheduled issuance date is the 4th of next month.

Three domestic credit rating agencies—Korea Corporate Rating, Korea Credit Rating, and NICE Credit Rating—have assigned Hana F&I a credit rating of “A+.” The rating outlook is “stable.”

5 Trillion Won in Non-Performing Loans Purchased Over Three Years… Maintaining Top-Tier Position

The domestic NPL market, which serves as the foundation of Hana F&I’s core business, continues to expand compared to previous years. The volume of NPL sales by banks, measured by outstanding principal balance (OPB), increased from 2.4 trillion won in 2022 to 5.5 trillion won in 2023 and 8.3 trillion won in 2024. Sales also reached 8 trillion won last year, and 1.5 trillion won worth of NPLs were sold in the first quarter of this year.

In line with the market expansion, Hana F&I’s operating assets have also increased. The size of its operating assets expanded from 1.2 trillion won at the end of 2022 to 2.3 trillion won at the end of 2023, 2.7 trillion won at the end of 2024, and 2.9 trillion won at the end of last year. As of the end of March this year, it remains at the 2.7 trillion won level.

From 2023 through the first quarter of this year, Hana F&I purchased approximately 5 trillion won worth of non-performing loans. Korea Ratings assessed that Hana F&I maintains a leading market position in the NPL market.

Based on its expanded investment portfolio, the company is also demonstrating solid profitability. Last year, Hana F&I recorded a net income of 37.1 billion won and a return on assets (ROA) of 1.3%. In the first quarter of this year, it posted a net income of 10.1 billion won and an ROA of 1.4%.

In 2024, net income declined as recovery performance for some investment assets weakened due to a downturn in the real estate market. Last year, profitability recovered as net interest income increased and recovery performance for certain assets improved.

"Lower Purchase Rate Is Positive… Real Estate Recovery Remains a Variable"

The average purchase rate for NPL assets has also fallen compared to the past. Hana F&I’s average purchase rate fell from 94.0% in 2022 and 90.4% in 2023 to 69.8% in 2024 and 62.5% last year. In the first quarter of this year, it stood at 79.3%.

The average NPL purchase rate is the ratio of the actual purchase price to the outstanding principal of non-performing loans; the lower the purchase rate, the greater the discount, which increases the potential for profit during the future recovery process.

A lower NPL purchase rate can increase the potential for generating profits during the debt recovery process. However, whether profitability actually improves will depend on the pace of recovery in the real estate market and the recovery performance of existing investment assets.

Financial stability has improved since the capital increase at the end of 2023. Hana F&I conducted a capital increase of 149.9 billion won in December 2023. As a result, equity increased from 314.1 billion won at the end of 2022 to 512.9 billion won at the end of 2023.

The leverage ratio fell from 7.0x in September 2023 to 4.7x at the end of that year. Although it rose again following the expansion of investment assets, it is currently being managed at 5.0x as of the end of March this year.

Korea Credit Rating Agency (KCRA) projected that Hana F&I’s financial stability would be maintained, considering the strengthened capital buffers following the capital increase and the company’s leverage management strategy.

Kim Kyung-geun, a senior analyst at Korea Ratings, stated, “The fact that the company is restructuring its funding mix by reducing the proportion of commercial paper and increasing the proportion of corporate bonds is also positive from the perspective of financial stability.” He added, “Considering the level of management at the holding company level and the company’s plans to adjust purchase volumes based on expected recovery amounts, it is expected that the current level of financial stability will be maintained.”