South Korean companies have set a new record in corporate bond issuance, crossing the 100 trillion won mark in just three quarters amid heightened economic uncertainty. Both the volume of new bonds issued and the total outstanding corporate debt have reached all-time highs as businesses rush to secure liquidity.

According to data released by the Korea Financial Investment Association on September 29, the value of corporate bonds issued from January 1 to September 26 this year reached 105.33 trillion won. This marks the first time the 100 trillion won threshold has been surpassed within the first three quarters—a figure over 18 percent higher than the same period last year.

The upward trend is stark: annual issuance has increased from 66 trillion won in 2022, to 77 trillion won in 2023, and 89 trillion won in 2024, with this year seeing particularly pronounced growth.

With this surge, the aggregate balance of corporate bonds held by Korean businesses has ballooned to a record-high 420.62 trillion won. Net issuance—the total amount raised minus repayments—stood at 28.1 trillion won so far this year, the highest since 2019.

Industry experts forecast that the annual issuance could hit new records if rollover-driven issuance continues, particularly with 44 trillion won in bonds maturing within the next six months.

However, concerns are emerging regarding how these funds are actually being used. For example, Binggrae issued 70 billion won in unsecured public bonds this month, aiming to allocate 40 billion won for operational funding, including raw material purchases. Likewise, Lotte Chilsung Beverage issued 250 billion won in bonds to repay debt maturing early next year. Analysts note an increasing trend of using bond proceeds for refinancing and daily operations rather than new investment, suggesting companies are operating in “survival mode.”

Kim Jin-il, professor of economics at Korea University, observed, “If newly issued corporate bonds fund core industrial investments such as artificial intelligence or semiconductors, the impact on the broader economy would be positive. However, if they are used mainly for refinancing existing debt or operational purposes, it raises red flags. Over the medium to long term, rising interest costs could further constrain new investments and weaken the capacity to respond to crises.”

There are also mounting concerns that systemic risks could rebound if defaults in real estate project financing or a downturn in the petrochemical sector intensify—potentially turning the current debt structure into a “boomerang.”

Further compounding concerns, some financial instruments—such as price return swaps (PRS) and convertible preferred shares (CPS) issued by companies like SK Innovation—are classified as equity on paper but essentially function as debt. This means companies’ true debt burdens may be even higher than official figures suggest.

Suk Byung-hoon, professor of economics at Ewha Womans University, explained, “With the government strongly emphasizing corporate value enhancement, it has become harder for companies to raise capital through rights issues or IPOs. In response, amid ongoing economic uncertainty, demand for preemptive fundraising is increasingly being channeled into the public corporate bond market.”

Note “This article was translated from the original Korean version using AI assistance, and subsequently edited by a native-speaking journalist.”

Photo=Yonhap News Agency