[Edaily Marketin LEE GEON-EOM Reporter] A new issuer has entered the specialized credit finance company bond market for the first time in 58 months. It is KG Capital (formerly K-Car Capital), rated “BBB+.” Amid a virtual halt in the supply of non-investment-grade corporate bonds due to a series of defaults by non-investment-grade companies—including JR Global REIT and affiliates of the Joongang Group—there are expectations that the entry of a BBB-rated specialized credit finance company into a regular public offering regime could help revive the stagnant high-yield market.

According to the financial investment industry on the 22nd, KG Capital submitted a blanket registration statement for unsecured bonds to the Financial Services Commission that day. The planned issuance amount is 50 billion won. Starting on the 30th of this month, when the registration takes effect, the company will be able to issue public bonds as needed for one year, through October 29, 2027. This marks the company’s first move in the capital market since it changed its name from K-Car Capital to KG Capital on the 1st and completed the process of joining the KG Group.

The blanket registration system allows issuers to report the volume to be issued over the next year in advance and then issue bonds within that period simply by submitting supplementary documents for the blanket registration. Under this system, the lead underwriter confirms institutional demand in advance to set the interest rate and volume, and proceeds with the issuance immediately, bypassing the public bookbuilding process. Unlike individual public offerings, which require a bookbuilding process for each tranche, this method allows issuers to adjust the timing of issuance according to market conditions. For this reason, it is primarily utilized by finance companies for whom the timing of fundraising is critical. This marks the first time in 58 months that a new issuer has joined the finance company bond market under the blanket registration system.

The significance of blanket registration in the financial company bond market goes beyond mere convenience in issuance. While it is similar to private placements in that it involves issuing bonds after confirming institutional demand in advance, it retains the status of a public offering. Consequently, it can attract investors, including institutions that are only permitted to hold public offerings. Another advantage is that it provides a foundation for accessing institutional investors who regularly include blanket registration issues in their portfolios.

This move is drawing particular attention because KG Capital’s bulk filing comes at a time when the supply of BBB-rated public bonds has effectively ground to a halt. Given the nature of financial asset-backed bonds—where small-scale issuances occur frequently—this development could increase the volume of bonds that high-yield investors, who have struggled to find suitable investment opportunities, can reliably acquire.

In fact, the supply of BBB-rated public corporate bonds has decreased significantly. This is because investor sentiment toward non-investment-grade bonds in general has cooled considerably following JR Global REIT’s filing for rehabilitation proceedings and the subsequent entry of Jungang Group affiliates into court-supervised restructuring.

According to the Financial Supervisory Service’s electronic disclosure system, the issuance volume of BBB-rated public corporate bonds from January to September of this year totaled 665 billion won, a 61.1% decrease compared to the same period last year (1.711 trillion won). Compared to the 34.1% decline in total public corporate bond issuance during the same period, the drop in BBB-rated bonds was much steeper. The share of BBB-rated bonds in total issuance also fell from 2.6% to 1.5%.

The downward trend has become even more pronounced in the second half of the year. In July and August, BBB-rated issuance totaled only 40 billion won and 20 billion won, respectively, and following September, there have been no BBB-rated public corporate bond issuances so far this month.

Another reason KG Capital’s bulk filing is drawing attention is that it reflects a trend of steadily improving creditworthiness, even as non-investment-grade issuers are being shunned by the market. Since its establishment in November 2018, KG Capital received its first BBB credit rating in May 2023, and its outlook was changed to “positive” in June of last year.

A “positive” outlook indicates a high likelihood of a rating upgrade within the medium term. Indeed, following Korea Credit Rating Agency’s one-notch upgrade to BBB+ in February of this year, Korea Corporate Rating also raised the rating to BBB+ in April. BBB+ is the highest rating within the BBB category included in high-yield and credit funds.

The company has also been making gradual inroads into the public offering market. In September of last year, KG Capital received 45 billion won in orders during its first public bond bookbuilding, targeting 30 billion won. The 1.5-year bond was fully subscribed at 4.40%, the lower end of the target yield range (4.40–5.00%), and the final issuance amount increased to 39 billion won.

In April of this year, immediately after its rating was upgraded to BBB+, the company conducted a bookbuilding process, receiving 16 billion won in orders and issuing 15 billion won. The interest rate was set at 4.7%, the upper end of the target range (4.10–4.70%). With this May issuance, the company also met the requirement for a lump-sum filing—namely, “a track record of public offerings of the same type of securities within the past year.”

However, some observers note that since the issuance is taking place without a book-building process, it remains to be seen whether the BBB+ securities will be steadily absorbed by institutional demand. Analysts point out that because the issuance volume is determined only after preliminary demand is confirmed, the key challenge for lower-rated issuers is expanding the base of investors willing to consistently absorb such securities.

In this regard, a KG Capital official stated, “We expect the rating upgrade to BBB+ combined with this consolidated filing to have a significant effect on expanding our investor base,” adding, “Based on the consolidated filing, we plan to respond more agilely to market conditions and gradually expand our reach among institutional investors.”