Hyundai Engineering to raise $100 million via bond sale

Hyundai Engineering & Construction hopes to solve its cash crisis via the issue of around $100 million in bonds.

Cash-strapped Hyundai Engineering & Construction (HEC) plans to raise up to $100 million via a bond issue, according to a company spokesman. He denied a Maeil Business Newspaper report the issue will be exchangeable for shareholdings in Hyundai Motor and Hyundai Heavy Industries and also scotched market talk it would be guaranteed by Korea Development Bank (KDB) and Korea Export and Import Bank (KEXIM).

"We do have a plan to raise around $100 million, but by using different tools to that mentioned in the report," says the spokesman.

At end-May, HEC was forced to use its shareholdings in Hyundai affiliates as collateral to obtain an additional W200 billion (about $179 million) of short-term credit from banks. Like many Korean corporates, HEC has seen its credit facilities dry up of late as the country's investment trust corporations (ITCs) face mounting cash calls amid concerns surrounding the quality of their assets, which are held at cost as opposed to on a mark-to-market basis. The surge in mutual fund redemptions means ITCs are no longer able to rollover maturing debts, and this has triggered a cash crisis for financially stretched entities such as HEC.

As evidenced by HEC's woes, the commercial paper and corporate bonds held by the ITCs isn't gilt-edged - far from it in some cases.

Details of the HEC bond are expected to be unveiled next week.