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| Hyosung Chemical's factory in Ulsan / Korea Times file |
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| Hyosung Chemical President Lee Kun-jong |
Hyosung Chemical failed to attract institutional investors during Tuesday's demand forecasting for its A-rated corporate bond, which is collectively worth 120 billion won ($97 million), proving that investors still remain skeptical about the chemical product manufacturer's profitability.
The result was in stark contrast to the outcome of demand forecasting the same day for LG Chem's 400 billion won corporate bond rated AA+. The chemical unit of LG Group attracted nearly 4 trillion won in orders.
Before the demand forecasting for Hyosung Chemical's corporate bond, there was cautious optimism among market insiders, as trillions of won flew into the corporate bond market earlier this year to acquire debt rated AA or higher issued by companies.
However, no institution had ordered Hyosung Chemical's corporate bond, despite its relatively higher yield, which in theory should have attracted more investors.
Such negative sentiment toward Hyosung Chemical is partially attributed to domestic credit rating agencies that adjusted the company's credit outlook late last year.
Korea Investors Service lowered its credit outlook for Hyosung Chemical last December to "negative" from "stable." NICE Investors Service also pointed out that Hyosung Chemical's large-scale spending in Vietnam has delayed the improvement in the company's financial soundness.
Last year, the producer of polypropylene, terephthalic acid and film was hit by the rise in raw material prices in the aftermath of Russia's invasion of Ukraine and by sluggish demand caused by China's COVID-19 lockdown measures.
As a result, its operating loss during the first three quarters of last year reached 241.1 billion won. Its debt-to-equity ratio also rose to 1,395.1 percent in the third quarter of last year from 232.8 percent at the end of 2020.
If Hyosung Chemical's corporate bond remains unsold after the subscription on Jan. 27, underwriters including the Korea Development Bank, KB Securities and Korea Investment & Securities should acquire the bond.
The chemical firm is therefore able to avoid a setback in its plans to raise money this time.
However, it has become uncertain whether the company will be able to attract additional investments amid worsening investor sentiment.
Securities analysts expect Hyosung Chemical to suffer for a while due to the slower-than-expected demand recovery.
"Hyosung Chemical seems to have suffered 70.9 billion won in operating losses during the fourth quarter of last year, due to sluggish demand as a result of the economic recession and reduced capacity utilization rate after repairing its Vietnamese factory," Heungkuk Securities analyst Chang Hyun-koo said.
