[Edaily Marketin Reporter KIM YEON-SEO ] Amid a sharp decline in corporate bond issuance during the summer off-season, Hana F&I (A+) and Meritz Financial Group (AA0) are entering the public bond market. With recent corporate bond bookbuilding rounds proving successful, there are expectations that credit investor sentiment—which had been subdued—will recover.

According to the financial investment industry on the 26th, Hana F&I and Meritz Financial Holdings will conduct bookbuilding among institutional investors in the corporate bond issuance market this week (July 27–31).

On the 27th, Hana F&I will conduct a bookbuilding process for the issuance of public corporate bonds totaling 150 billion won. The tranches (maturities) consist of a 1.5-year tranche worth 30 billion won, a 2-year tranche worth 70 billion won, and a 3-year tranche worth 50 billion won.

The target yield spread for all three tranches has been set at –30 to +30 basis points (bps; 1 bp = 0.01 percentage point) relative to the ratings assigned by 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.”

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 that of corporate bonds is positive from a financial stability perspective.” 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 can be maintained.”

Meritz Financial Holdings will conduct a book-building process on the 29th for the issuance of corporate bonds totaling 150 billion won. The issuance consists of 80 billion won in 2-year bonds and 70 billion won in 3-year bonds, and the company plans to increase the issuance amount to a maximum of 280 billion won depending on the results of the book-building.

The target yield band for both tranches was set at –30 to +30 basis points relative to the ratings from independent private bond rating agencies. NH Investment & Securities, KB Securities, Korea Investment & Securities, and Shinhan Investment & Securities are serving as lead underwriters. The scheduled issuance date is the 6th of next month.

While Meritz Financial Group maintains strong business competitiveness and profit-generating capacity, primarily in insurance and securities, the recent deterioration in its asset quality indicators is cited as a concern.

Lee Jae-woo, a senior analyst at Han Shin Rating, stated, “Meritz Financial Group is expected to maintain strong business competitiveness and profit-generating capacity, centered on its insurance and securities businesses,” but added, “Amid a rise in the non-performing loan ratio, some large-scale transactions jointly invested in by affiliates have been classified as ‘under observation’ or lower, raising the possibility that the burden of managing asset quality will increase in the short to medium term.”

The Issuance Market Is Quiet, but… Signs of a Recovery in Credit Demand

Recently, the corporate bond market has seen a significant decline in the number of issuers due to the summer off-season and increased interest rate volatility. However, credit demand from institutional investors remains robust, as evidenced by companies conducting bookbuilding securing orders that far exceed their target fundraising amounts.

On the 22nd, SK Eco Plant (A-) secured 987 billion won in orders—approximately 10 times the target amount—during a 100 billion won bookbuilding process. Following this, on the 23rd, KCC (AA-) also achieved a successful issuance, receiving 1.385 trillion won in orders for its 200 billion won offering. Analysts attribute this to higher absolute interest rates boosting investment appeal, as the supply burden has eased due to a lull in new issuances.

There are also forecasts that investor sentiment in the credit market will improve further in the second half of the year as the flow of funds—which had shifted from fixed-income products to other assets—begins to stabilize. However, since interest rates and credit risks have not been fully resolved, experts advise gradually expanding the investment scope, focusing primarily on investment-grade and high-grade securities.

Kim Sang-in, an analyst at Shinhan Investment Securities, stated, “We expect supply pressures to ease in the second half of the year and for the ‘money move’ that has been weighing on credit demand to subside,” adding, “Proactive positioning demand is expected to flow in, driven by higher credit carry and attractive spreads.”

He added, “Since interest rate and credit risks remain, a phased buying approach is necessary,” noting, “It is advisable to start with investment-grade and high-grade bonds, which have room for spread narrowing, and then gradually expand into lower-rated bonds.”