이 기사는 2021년 11월 09일 08시06분 thebell에 표출된 기사입니다

South Korea’s Hanjin KAL, Hanjin Group’s holding company, has tapped the private bond market again to raise money to help its airline subsidiaries weather the Covid-19 pandemic.

Hanjin KAL raised 14 billion won ($11.8 million) in a private bond placement last Thursday. The 2-year bond was issued at a yield of 3.98%, about 227bps below the average BBB0-rated bond yield of 6.247% in the public bond market on the same day based on data from KIS Pricing.

The offering demonstrates Hanjin KAL’s ability to access the private bond market as the holding company seeks to diversify its financing sources and explore ways to lower borrowing costs.

Proceeds from the bond sale are to be used to fund a 56.7 billion won capital injection into Jin Air, Hanjin KAL’s low-cost carrier arm.

Bond issues by Hanjin KAL have accelerated since last year as its subsidiaries continue to suffer from the pandemic. Hanjin KAL has pumped nearly 1 trillion won into its subsidiaries including Jin Air and Korean Air, the largest airline in the country, through capital injections and loans over the past two years.

Hanjin KAL returned to the public bond market in two years in March this year, raising 144 billion won through an issuance of the 2-year bond at 10bps above the average yield. However, concerns grew about its ability to secure sufficient interest from investors in the public bond market due to poor financial performance of its subsidiaries and a potential liquidity shortfall.

Alternatively, Hanjin KAL opted to tap the private bond market. The attempt was successful: In March it raised 13 billion won with a 2.5-year maturity at a yield of 3.8%, 23bps lower than the average yield at the time. It also raised an additional 10 billion won from a private bond sale in the following month.

With increased bond issues, Hanjin KAL’s leverage surged in recent years. Its debt ratio increased from 24.7% at the end of December 2019 to 59.3% at the end of June 2021. Net debt grew more than fourfold to 787 billion won from 174 billion won in the same period. At the same time, the company’s cash equivalents balance reduced to 99 billion won.

While some are cautiously optimistic about the rebound of the airline industry as vaccinations increase, there are also other factors that could result in continued delays in the industry’s recovery. This could lead to an increase in Hanjin KAL’s financial burdens.

Hanjin KAL generated negative operating cash flow of more than 100 billion won in 2020 on a consolidated basis. It also had a free cash flow deficit of approximately 245 billion won in the same period. (Reporting by Chan-mi Oh)