Korean firms turn to pricy short-dated financing amid liquidity squeeze

Korean listed companies turning to short-term borrowings have been on the increase amid worsening financing situation and continued rises in interest rates.

According to the Korea Exchange on Monday, 159 have so far disclosed of increases in short-term loans.

Listed members are required to disclose new short-term loans if they are equivalent to 10 percent or more of their equity capital (5 percent or more in the case of 2 trillion won ($1.39 billion) or more in equity capital),

Short-term borrowings include private bonds with a maturity of less than one year.

Companies have to turn to short borrowings in case of mismatch in the balance, which often happens during liquidity woes.

Sunic System reported short-term borrowing of 13 billion won, equivalent to 15 percent of its equity capital.

“Investors became wary of loan situation as it affects viability during tight liquidity period,” said an official from the Korea Exchange.

Companies with low credit ratings inevitably must resort to short-term financing as they find it difficult to sell long-term bonds. But even household Korean corporate names are having trouble in raising funds due to soured debt market from the default of securities related to Legoland.

AA-rated SK hynix was able to sell one-year bond at 5.34 percent, far above the government bond yield of 3.761 percent in the same maturity.

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