Shinsegae with AA credit rating to issue 150 billion won in public bonds - Korean media

Shinsegae will issue 150 billion won (US$158 million) worth of public bonds. Despite slowing profitability and continued investment burdens, the company has maintained its AA credit rating and is considered a "high quality bond."
According to the investment banking industry, Shinsegae is expected to receive 50 billion won (US$49.5 million) in two-year bonds and 100 billion won (US$50.2 million) in three-year bonds based on its demand forecast on the 20th.
The bond issue will be worth 100 billion won (US$105 million). If demand is high, the amount can be increased to a maximum of 250 billion won (US$254 million). The issue will be held on the 30th, and the managers are NH Investment & Securities and KB
The three companies are Korea Investment and Securities, Shinhan Investment and Securities, and Samsung Securities. Shinsegae plans to use the proceeds from the bond offering to repay loans.
"We have decided to issue bonds to repay 180 billion won (US$190 million) in borrowings," he said. Prior to the bond issue, Korea Credit Rating and NICE Credit Rating had
The credit rating of the unguaranteed bonds of Samsung Electronics Co., Ltd. was maintained at AA (stable). The credit rating is supported by the company's diversified business portfolio, which is centered on department stores, as well as duty-free shops, wholesale and retail, hotels, and real estate, and by its excellent assets.
However, the deterioration of the performance of the duty-free store division and the burden of borrowing for expanding investment are pointed out as negative factors.
Shinsegae is expected to record a consolidated operating profit of 477 billion won (US$477 billion) in 2024, down from 645.4 billion won in 2022.
The duty-free store division in particular recorded an operating loss of 37.4 billion won (US$36.2 billion). The department store division maintained solid profitability, but the high interest rate and
The slowdown in consumption of brand-name goods had a negative impact. Department stores' operating profit margins are expected to fall from 7.3% in 2022 to 5.6% in 2024.
On the financial side, net borrowings are increasing due to increased investment.
The consolidated net borrowings of the group companies are expected to be approximately 4.5 trillion won (US$4.75 billion), up approximately 1 trillion won (US$1.05 billion) from the end of 2022 (3.5 trillion won/US$3.69 billion).
The company's borrowings are 4.3 times higher and its interest expenses are 5.3 times higher. However, it has about 8 trillion won (about 845 billion yen) in tangible assets, its own stock, and other quality assets, so it has ample room for alternative financing.
Since the presidential election, orders for high-quality AA-grade corporate bonds have continued to be concentrated at over 1 trillion won, and investment demand in the market as a whole has remained strong.
Kai is one of the issuers that enjoys a relatively high reputation in the market, thanks to its excellent assets, brand value, and stable cash flow.
Since being spun off into E-Mart in 2011, Shinsegae has expanded into the department store business, duty-free shops, real estate, clothing and cosmetics.
Recently, it has been involved in the new deposit for the Incheon International Airport Duty Free Shop (240 billion won/approximately 25.3 billion yen) and the Gwangju U Square Terminal.
The company continues to make large-scale investments, including acquisitions (470 billion won/approximately 49.6 billion yen), and its strategy is to continue to secure growth through the renewal of major stores and the expansion of new businesses.
"The improved profit base of key sectors such as department stores remains effective, and the scale of profit generation is also expected to remain stable despite the spread of the COVID-19 virus," said Seo Min-ho, a researcher at Korea Credit Rating.
"Profitability has declined somewhat due to the decline in performance of the duty-free store division and increased investment, but we are able to share the investment burden thanks to our high-quality assets and sales capabilities," he said.
"If the performance of the duty-free store division recovers and new business investments prove fruitful, the company's creditworthiness may improve," it added.