KEPCO bonds sell at mid-5%, highest in 25 yrs, amid oversupply and ballooning debt
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KEPCO on Tuesday issued 380 billion won in bonds at a yield of mid-5 percent – higher than 4.5 percent level in the wake of 2008 global financial crisis.
The two-year bond was priced at 5.5 percent, three-year’s at 5.6 percent, and five-year’s at 5.62 percent. A year ago, the company was able to issue bonds in three-year maturity at less than 2 percent.
KEPCO incurred 14.3 trillion won in losses in the first six months and annual losses are projected to stretch to as much as 40 trillion won.
Widening losses and thinning reserves had sent KEPCO to seek more debt.
“There is too much supply for institutions to digest given investment portfolio,” said an analyst from a securities firm who asked to be unnamed. “Some even say that KEPCO bonds are distorting corporate bond market.”
The interest rates have gone up due to greater issue in shorter two- and three-year bonds.
KEPCO’s long-term rating in won-denominated bonds is AAA, which is the same as the government. Market watchers, however, noted that its market value is lower than the external rate amid increased supply.
“Institutions actually buy KEPCO bonds regarding them as AA credit rating,” said an unnamed industry official.
The spread between government and KEPCO bonds has widened to more than 1 percentage point since last month to 1.178 percentage points as of Wednesday.
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