[This article was reported on “Radar M,” a paid media outlet specializing in the capital market in Mail Business, on August 13 (14:52)]
Demand for acquisition financing, which is a loan utilized to acquire and sell companies, and “refinancing,” which refinance the acquisition financing with other loans, has been increasing recently.
This is becautilize the current loan interest rate is lower than two to three years ago, so refinancing can reduce interest costs.
According to the investment bank (IB) indusattempt on the 13th, Bain Capital’s Clash refinancing (900 billion won) and Affinity’s Job Korea refinancing (685 billion won) are currently underway.
Currently, both cases are being selected as host companies. Refinancing refers to raising funds again to repay existing loans.
Usually, the refinancing rate is set by adding 220-240 bp (2.2% to 2.4%) to the five-year bank bond rate. Recently, the interest rate on five-year bank bonds has been lowered to the 2.8% range, and as competition for the selection of the host company intensifies, the additional interest rate is also at the lowest level of 220bp. If this is added, refinancing is possible in the early 5% range.
There are already cases of reducing interest costs through refinancing in the first half of this year.
EQT Partners conducted SK Shields refinancing worth about 3.3 trillion won at an early 5% interest rate.
According to Korea Credit Ratings, the annual interest expense saved by SK Shields through this refinancing is estimated to be between 35 and 50 billion won. The existing interest rate was around 7%.
An official from the IB indusattempt explained, “As interest rates fall, refinancing and acquisition financing are being carried out in the early 5% range,” adding, “If interest rates fall in the future, there will be more demand for refinancing.”
This contrasts with the situation a year or two ago. When MBK acquired Medit Ostem Implant in 2023, or when Glanwood PE acquired SK P.Core, interest rates were applied in the 7% range. Last year, when IMM PE refinanced Hana Tour’s acquisition financing, interest rates in the 6% range were applied.
In addition to refinancing, acquisition financing is also expected to be activated based on interest rates in the early 5% range.
KKR recently acquired cosmetics container company Samhwa for 800 billion won, and Kookmin Bank will provide about 230 billion won in acquisition financing at an interest rate in the early 5% range.
In addition, Bain Capital recently acquired the HS Hyosung Steelcode business for 910 billion won, with multiple banks and securities companies offering to provide Bain Capital with acquisition financing at an early 5% interest rate.
If interest rates in the IB indusattempt fall further, it is expected that acquisition of new companies and refinancing of existing acquired companies will become active.
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