Funds raised by Korean companies through non-borrowing liabilities such as price return swaps (PRS) have nearly quadrupled over four years, data showed. Companies are increasingly turning to these alternative financing tools as bank loans and corporate bond issuances become more difficult to secure. While non-borrowing liabilities are not classified as borrowings on financial statements, analysts warn that a rapid buildup could undermine corporate earnings and credit ratings, requiring close monitoring.
According to the Bank of Korea's (BOK) "March Financial Stability Assessment" released Thursday, the outstanding balance of funds raised through non-borrowing liabilities — including PRS and trade-based securitization such as corporate purchase cards and checks — surged from 7.3 trillion won ($5.3 billion) in 2021 to 27.5 trillion won in 2025, a roughly 3.8-fold increase over four years. PRS balances in particular skyrocketed 138-fold, from just 100 billion won in 2022 to 13.8 trillion won last year. The trend stands in stark contrast to financial institution lending growth to corporations, which slowed from 13.4% in 2021 to 2.2% in 2025.
A PRS is a transaction in which a company sells shares it holds (underlying assets) to investors such as financial institutions to raise funds, while simultaneously entering into a derivatives contract to settle the price fluctuations of those shares at a later date. If the underlying asset's share price rises, the company (swap seller) receives the difference (market price minus reference price) from the investor (swap buyer). If the price falls, the company pays the difference to the investor.
The BOK's survey found that companies in vulnerable sectors and lower-rated firms are the primary users of non-borrowing debt financing methods such as PRS. These companies are understood to be relying on such instruments as alternatives when loans and bond issuances are not readily available.
According to the BOK, funds raised by petrochemical companies through PRS stood at 700 billion won in 2024 but ballooned to 5 trillion won last year. Among companies using PRS, sub-investment-grade firms accounted for 44.6% last year. Trade-based securitization was also heavily concentrated in sectors such as petrochemicals, construction, and electronics.
The BOK noted that non-borrowing debt financing has a positive aspect in diversifying corporate funding sources, but cautioned that credit risks of these companies may be underestimated. Although these instruments are not recorded as debt on balance sheets, they function as "shadow debt" that could affect corporate financial soundness at any time.
"In the case of trade-based securitization, these are essentially equivalent to short-term borrowings, but because they are recognized as accounts payable and other non-borrowing items on financial statements, the financial soundness of these companies may be assessed as better than it actually is," a BOK official said. "In the case of price return swaps, there are concerns that they could amplify earnings volatility for the swap-selling companies." If the underlying asset price falls below the reference price at maturity, the swap-selling company must compensate the investor for losses, potentially further deteriorating its financial performance.
"Non-borrowing liabilities such as price return swaps and trade-based securitization are not classified as borrowings on financial statements, but the fact that they can negatively affect the stability of a company's financial structure should be fully considered in credit risk assessments," the official stressed. Particularly as vulnerable sectors and lower-rated companies are heavy users, any deterioration in these liabilities could cascade into a broader tightening of funding conditions across industries, warranting close monitoring.