Hanjin Finalizes 40 Billion Won Bond Issuance with Weak Demand and Elevated Rates, Proceeds for Debt Refinancing Amid Financial Strain
Hanjin has finalized the issuance terms for its 127-1 and 127-2 unsecured bonds totaling 40 billion won based on book-building results. The 20 billion won 127-1 tranche saw a low competition rate of 0.95 times, with the final interest rate set at the individual corporate bond yield plus 0.50 percentage points. The 127-2 tranche of 20 billion won showed a slightly better rate of 1.25 times, but the final yield was set at the average individual yield without any spread, reflecting market concerns.
Proceeds will be used entirely to repay the 70 billion won 117-2 public bond maturing on July 22, 2026. The payment date is July 23, with the remaining 30 billion won to be funded from Hanjin's own cash and liquid assets.
As of the first quarter of 2026, Hanjin's loan dependency ratio stood at 49.6%, debt-to-equity ratio at 183.6%, and interest coverage ratio at 0.64 times, indicating operating profit is insufficient to cover interest expenses. The company recorded a net loss of 2.3 billion won, and financial improvement is delayed due to heavy investment burdens and fixed interest costs.
Hanjin has maintained dividends for 28 consecutive years at 600 won per share, but sustainability may be at risk if financial instability continues. It holds 478,401 treasury shares, 3.08% of outstanding, with no additional buyback plans. A remaining convertible bond balance of 8.7 billion won poses potential dilution.
Hoban Construction has increased its stake in Hanjin KAL to 20.15%, narrowing the gap with Chairman Cho Won-tae's group, raising the possibility of a management change. The Hanjin Group faces litigation risks totaling 60.1 billion won, and while its credit rating remains BBB+ with a positive outlook, a downgrade is possible if financial metrics worsen.
[AI Summary]Hanjin's bond issuance is an unavoidable refinancing to meet maturing debt, aiding short-term liquidity but the weak demand and high rates reflect market concerns. Without fundamental financial improvement, debt dependency will likely persist, and the low interest coverage ratio and continued net loss pose investment risks. Despite maintained dividends, potential shareholder value erosion due to deteriorating financial health warrants attention.
KOSPI Filing Information
[Confirmation of Issuance Terms] Securities Registration Statement (Debt Securities)