South Korea's top two cable makers secure major funding despite high-rate headwinds

Taihan Cable & Solution expands bond issuance after demand triples target

LS Cable issues zero-interest exchangeable bond via subsidiary

Both firms weather tightening conditions on AI investment boom

Taihan Cable & Solution works on an ultra-high-voltage power grid project in Singapore. [Taihan Cable & Solution]

South Korea's two leading cable manufacturers, Taihan Cable & Solution and LS Cable & System, have successfully raised large sums of capital even as high interest rates have pushed domestic companies into a deep funding freeze — buoyed by surging investor appetite for AI-related infrastructure.

According to a revised securities filing disclosed through DART on Wednesday, Taihan Cable & Solution said it would increase its planned corporate bond issuance from 40 billion won ($29.4 million) to 49 billion won.

The expansion followed a bookbuilding session for institutional investors held Tuesday, in which demand came in at nearly three times the company's target. Taihan secured 119 billion won in purchase orders in total. The two-year tranche drew 43 billion won in orders, a coverage ratio of 2.15-to-1, while the three-year tranche attracted 76 billion won, a ratio of 3.8-to-1.

The offering marks back-to-back successful fundraising for Taihan, following an 80 billion won corporate bond it issued last year. That earlier deal drew 888 billion won in demand — roughly 11 times the amount sought.

Industry observers note that while the latest deal drew less enthusiasm than last year's, it is still considered a strong result given the current tightening environment. Funding conditions for Korean companies have worsened further after the Federal Reserve raised its benchmark interest rate Thursday, with other major central banks also pivoting toward tighter monetary policy.

When US rates rise, yields on US Treasuries and global market rates face upward pressure, typically forcing Korean companies to accept higher borrowing costs on new issuances. Corporate bond issuances through Monday totaled 90.32 trillion won, down 10.4 percent from the same period a year earlier, according to the Korea Financial Investment Association.

LS Cable & System loads submarine cables at Donghae Port in Donghae, Gangwon Province. [LS Cable & System]

Amid this backdrop, LS Cable & System has also drawn attention after issuing a 500 billion won exchangeable bond at effectively zero interest. According to DART, LS Cable & System held a board meeting Sept. 10 and approved the issuance of an unsecured private-placement exchangeable bond, with 1,851,851 common shares of its subsidiary Gaon Cable as the underlying exchange target.

The bond carries a coupon rate and maturity yield of 0 percent. In lieu of interest, investors receive an option allowing them to exchange the bond for Gaon Cable shares at any time of their choosing. If Gaon Cable's closing share price exceeds 150 percent of the exchange price of 270,000 won for 10 consecutive trading days, bondholders may convert all or part of the exchangeable bond into Gaon Cable shares at that exchange price.

An exchangeable bond is a debt instrument that gives the holder the right to exchange it for shares of a specified company. In this case, investors lend money to LS Cable & System and, if Gaon Cable's share price rises sufficiently, can convert their holdings into Gaon Cable shares at the predetermined exchange price. In effect, investors are betting that Gaon Cable's share price has room to climb above the exchange price of 270,000 won.

On Sept. 10, when LS Cable & System disclosed the board decision, Gaon Cable's closing price stood at 251,000 won. As of Wednesday, it had risen to 316,000 won.

Taihan Cable & Solution and LS Cable & System — the two dominant players in South Korea's cable industry — manufacture ultra-high-voltage power cables and submarine cables, and have been posting strong growth amid a surge in AI data center investment. The combined order backlog of LS Cable & System, Taihan Cable & Solution and Taihan's subsidiary Gaon Cable stood at 12.49 trillion won ($9.19 billion) as of the first half of this year, up 43.5 percent from a year earlier.

klee@heraldcorp.com