SK Hynix Inc., a global leader in memory chip manufacturing, recently raised a significant $1.5 billion through a foreign currency bond sale, signaling a robust vote of confidence in the semiconductor industry. This fundraising was notably four times oversubscribed, drawing a striking $6.5 billion in bids from institutional investors, showcasing a heightened investor interest in the sector.
This debt offering, divided into three and five-year notes, was a demonstration of market faith in SK Hynix’s financial health. The three-year notes amounted to $500 million and were issued at a rate 1.45 percentage points higher than the corresponding US Treasury yield. Meanwhile, the five-year bonds, totaling $1 billion, were set at 1.67 percentage points above the five-year US Treasury yield.
The overwhelming demand for these bonds led to a notable tightening of the spread between their coupon rates and US Treasury yields, shrinking to just 0.4 percentage point from the initial price guidance. This is a testament to the strong market appetite for SK Hynix’s debt instruments.
In a broader context, the bond sale follows S&P Global’s recent upgrade of SK Hynix’s credit outlook to stable, a positive shift from its previous negative stance. This marks the first revision since the agency downgraded the company last year, reflecting improving fiscal stability.
The success of SK Hynix’s bond issue is a promising sign for other South Korean firms looking to enter the global bond market. It underscores the growing interest in South Korean companies’ foreign bond issues, which have been gaining momentum. In 2023, non-state-controlled enterprises in South Korea issued $9.2 billion in foreign currency bonds, marking a significant 96% increase from the previous year.
This trend is set against a backdrop of global uncertainties, including the real estate crisis in China and geopolitical tensions in the Middle East. Despite these challenges, South Korean bonds are drawing investor attention, with analysts like Kim Joon-soo of NH Investment & Securities predicting a continued upswing in foreign bond issues from the region. This scenario presents a favorable climate for companies like SK On Co., POSCO Holdings Inc., and Hanwha TotalEnergies Petrochemical Co., as they prepare to leverage the global bond market for capital.
