South Korean blue-chip companies have been reluctant to tap into the bond market to raise funds despite ultra-low interest rates as they opted to deleverage amid uncertainties in the local economy as well as the global outlook from British vote to leave the European Union.

According to the Korea Securities Depository on Thursday, the total amount of debt issued by Korea’s conglomerates in the first half of this year plunged 10.2 percent to 29.4 trillion won ($25.8 billion) from 32.72 trillion won in the same period of the previous year.

By company, Hyundai Motor Group issued 710 billion won worth of debt during the January to June period this year, compared with 3.5 trillion won offerings in the same period last year. LG Group’s debt issuance halved from 2.64 trillion won to 1.25 trillion won over the cited period. The amount of bonds raised by GS Group shrank from 1.55 trillion won to 840 billion won during the same period.

Companies chose not to increase debt with less investment options amid foggy economic outlook. Sentiment also soured due to corporate restructuring drive.

Cash-strapped Hyundai Heavy Industries Co. that issued 2 trillion won worth debt last year, was absent in the market this year. The same story goes for other troubled shipbuilders such as Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co.

Lotte Group, under investigation on a range of illegality charges, has also cancelled a series of debt issues of its affiliates.

Demand has been dampened by rating downgrades and fears of restructuring and insolvencies of companies below investment grade.

“Blue chip firms don’t find it necessary to raise new funds while firms of lower creditworthiness in need of fund cannot afford to due to poor demand,” said a source from a securities firm.

By Chun Gyung-woon and Ko Min-suh

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]