This article appeared in the capital market compass "Signal" at 4:32 p.m. on June 10, 2026.
As shares of major conglomerate groups rally, brokerages are proactively proposing funding schemes that leverage affiliate stakes. Price return swaps (PRS) or mezzanine structures, in which the benefit of share price gains accrues to the issuer, are emerging as the main options under consideration. With the debt capital market (DCM) shrinking due to rising market interest rates, brokerages have grown desperate to secure new sources of revenue.
According to the investment banking (IB) industry Wednesday, several brokerages recently proposed to LS Cable & System (006260) funding schemes utilizing its stake in LS Eco Energy (229640) and other holdings. LS Cable & System is the largest shareholder of LS Eco Energy, holding a 63.35% stake. LS Eco Energy is a major listed subsidiary of LS Cable & System, alongside Gaon Cable (000500), LS Materials (417200) and LS Marine Solution (060370). At the end of last year, LS Eco Energy's share price moved sideways in the 30,000 won range, while this year it rose to a high of 109,800 won.
The brokerages are seen as having made their proposals preemptively, ahead of LS Cable & System's own moves to secure funding. In addition, affiliate stake monetization proposals are increasingly being submitted, centered on group companies expected to require large amounts of funding. LS Corp. (LS), which has had its funding route through subsidiary listings blocked, has also been presented with options to make up for this, and the company is known to be reviewing them as well. An IB industry official said, "I understand that brokerages are first reaching out and making monetization proposals not only to LS but also to POSCO, HD Hyundai and SK, where subsidiary share prices have risen markedly."
Some interpret the moves as being made with the contraction of the debt capital market in mind. According to the Korea Financial Investment Association, the yield on three-year AA- rated corporate bonds soared to 4.499% the previous day, the highest level in two years. As a result, inquiries about issuing not only corporate bonds but also hybrid securities, whose coupon rates are set based on the fair market yield, have noticeably declined, according to the industry. This stands in contrast to last year, when major conglomerates such as SK, Hanwha and HD Hyundai rushed to issue them.
While debt issuance has become disadvantageous, the stock market is on a rally, prompting brokerages to put weight on funding options that leverage share price movements. The logic that funds can be raised simply by appealing to the upside potential of share prices is gaining traction. In March this year, Kolon Industries was able to issue 100 billion won worth of exchangeable bonds (EB) backed by its stake in Woori Financial Group without promising a separate interest rate, which was not unrelated to the fact that its share price surged more than 48% from January to March.
