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Korean Air fails to place $300mn 30-yr bonds on Hanjin Shipping risks

Collected: 2016.09.28

Distributed: 2016.09.29

Source: Go Direct

South Korea’s largest air carrier Korean Air Line Co. failed to place $300 million 30-year bonds as they were undersubscribed due to investors’ jitters over the airliner’s exposure to its troubled sister company after it extended new loans to Hanjin Shipping Co.

According to the investment banking industry on Tuesday, the Korean full-service carrier, with a credit rating of BBB+, failed to attract enough investors for its dollar-denominated 30-year papers. The debt reportedly drew demand of only $200 million in the book building.

Market watchers believed the company’s decision to provide about 60 billion won to Hanjin Shipping currently under court management put a damper on the deal. Major foreign institutional investors who had expressed interest pulled out fearing spillover of liquidity woes should the shipper go insolvent.

“It would take some time for Korean Air to return to the debt market,” said a source from the industry.

The flag carrier hoped to bring down its debt-to-capital ratio of 1,082 percent to under 1,000 percent by paying off debt from the proceeds from the new issue. The company’s credit rating could fall due to the setback in the financing plan. It hopes to readjust rate terms once Hanjin crisis settles down next month.

By Ko Min-suh

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