Domestic compaines' direct financing tataled 71.72 trillion won in 1999, up 2.2 percent from the previous year's figure, the Financial Supervisory Commission said yesterday.
They raised 41.01 trillion won through the issuance fo stocks, a 189.7 percent increase from 1998, and the remaining 30.71 trillion won was raised via the sale of bonds, down 45.2 percent.
Corporate bond issuance trend
(Unit: 100 million won, %)
1995 1996 1997 1998 1999
Big firms (A) 209,402 265,236 323,480 552,933 249,786
SMEs (B) 26,580 33,813 19,741 7,070 57,328
Share of SMEs (B/C) 11.3 11.3 5.8 1.3 18.7
Total (C) 235,982 299,049 343,221 560,003 307,114
A salient feature of last year's financing was the huge jump in the issuance of corporate bonds by small and medium enterprises(SMEs).
SMEs floated a total of 5.73 trillion won worth of corporate bonds, postion a staggering 710.9 percent incerase from the 707 billion won recorded a year ago. SMEs' share of the total corporate bond issuance market increased from 1.3 percent in 1998 to 18.7 percent last year.
The commission said the active bond issuance by SMEs, despite their lower credit ratings compared with bigger firms, was attributable to the introduction of high-yield funds and subordinated bond funds which invest exclusively in below-investment grade bonds.
These new types of investment vehicles created demand for lower-grade corporate funds at a time when investment trust companies, traditionally the most active players in the bond market, ran short of liquidity because they had to redeem Daewoo Group bonds from investors.
In contrast to SMEs, big corporations sharply reduced bond issuance and resorted to the stock market to raise funds.
Firms affiliated with the topfive chaebol groups raised 21.13 trillion won from the stock market last year, an increase of 229.7 percent, and 10.48 trillion won by issuing bonds, down 73.9 percent. In all, the five groups' direct financing totaled 31.61 trillion won, down 32.2 percent from a year ago.
Of the finance raised through stocks in 1999, local companies acquired a total of 3.83 trillion won in initial public offerings (IPO), up 1,177.8 percent, and 37.19 trillion won in new rights offering, up 168.3 percent.
A booming local stock market facilitated corporate efforts to raise funds and improve their financial structure.
Another notable feature last year was that most of the corporate funds were issued without guarantees by financial institutions.
Unsecured corporate bonds accounted for 95.7 percent of the total bonds issued, up from 68.6 percent in 1997.
The commission said the bond issuance pattern has fundamentally changed since late 1997. One major cause of the change is that credit guarantee firms have become insolvent in the wake of the external crisis, forcing corporations to issue bonds based on their cerdit ratings and, at the same time, prompting underwriters and investors to purchase or invest in bonds based on the issuers' cerditworthiness.
They raised 41.01 trillion won through the issuance fo stocks, a 189.7 percent increase from 1998, and the remaining 30.71 trillion won was raised via the sale of bonds, down 45.2 percent.
Corporate bond issuance trend
(Unit: 100 million won, %)
1995 1996 1997 1998 1999
Big firms (A) 209,402 265,236 323,480 552,933 249,786
SMEs (B) 26,580 33,813 19,741 7,070 57,328
Share of SMEs (B/C) 11.3 11.3 5.8 1.3 18.7
Total (C) 235,982 299,049 343,221 560,003 307,114
A salient feature of last year's financing was the huge jump in the issuance of corporate bonds by small and medium enterprises(SMEs).
SMEs floated a total of 5.73 trillion won worth of corporate bonds, postion a staggering 710.9 percent incerase from the 707 billion won recorded a year ago. SMEs' share of the total corporate bond issuance market increased from 1.3 percent in 1998 to 18.7 percent last year.
The commission said the active bond issuance by SMEs, despite their lower credit ratings compared with bigger firms, was attributable to the introduction of high-yield funds and subordinated bond funds which invest exclusively in below-investment grade bonds.
These new types of investment vehicles created demand for lower-grade corporate funds at a time when investment trust companies, traditionally the most active players in the bond market, ran short of liquidity because they had to redeem Daewoo Group bonds from investors.
In contrast to SMEs, big corporations sharply reduced bond issuance and resorted to the stock market to raise funds.
Firms affiliated with the topfive chaebol groups raised 21.13 trillion won from the stock market last year, an increase of 229.7 percent, and 10.48 trillion won by issuing bonds, down 73.9 percent. In all, the five groups' direct financing totaled 31.61 trillion won, down 32.2 percent from a year ago.
Of the finance raised through stocks in 1999, local companies acquired a total of 3.83 trillion won in initial public offerings (IPO), up 1,177.8 percent, and 37.19 trillion won in new rights offering, up 168.3 percent.
A booming local stock market facilitated corporate efforts to raise funds and improve their financial structure.
Another notable feature last year was that most of the corporate funds were issued without guarantees by financial institutions.
Unsecured corporate bonds accounted for 95.7 percent of the total bonds issued, up from 68.6 percent in 1997.
The commission said the bond issuance pattern has fundamentally changed since late 1997. One major cause of the change is that credit guarantee firms have become insolvent in the wake of the external crisis, forcing corporations to issue bonds based on their cerdit ratings and, at the same time, prompting underwriters and investors to purchase or invest in bonds based on the issuers' cerditworthiness.
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