3-Party Alliance Subscribes at Least 900 Billion KRW to Hanjin KAL BW... Shareholding Competition Rekindled

If 1 Trillion Invested, 0.8% Secured
Outlook Before Securing Subscription Rights
Shareholding Competition Until Year-End

[Asia Economy Reporter Lim Jeong-su] The competition for securing shares of Hanjin KAL between Cho Won-tae, chairman of Hanjin Group, and the 'three-party alliance' consisting of Bando Group, KCGI, and former Korean Air Vice President Cho Hyun-ah is intensifying. Bando Group borrowed 750 billion KRW to participate in the subscription of Hanjin KAL's bonds with warrants (BW), and KCGI is also reported to have invested 150 billion KRW in the BW public offering. The competition to secure shares is expected to continue until the end of this year through methods such as securing subscription rights.

According to the investment banking (IB) industry on the 6th, the three-party alliance subscribed to at least 900 billion KRW or more in the Hanjin KAL BW public offering. Bando Group borrowed a total of 750 billion KRW through its affiliates Bando Development, Hanyoung Development, and Daeho Development to use as subscription funds. An industry insider explained, "Besides the 750 billion KRW borrowed by Bando Group from the market, it is highly likely that additional funds were invested through cash holdings and borrowings."

KCGI is also known to have invested 150 billion KRW. A KCGI official said, "The three-party alliance participated in the Hanjin KAL BW public offering, but it is difficult to confirm the exact scale of participation." The IB industry estimates that the three-party alliance invested at least 1 trillion KRW in the Hanjin KAL BW subscription. An industry insider estimated, "In the final days of the two-day subscription period, several trillion won of lump-sum funds flowed in, and a significant portion of this is likely to be funds from the three-party alliance."

A total of 7.335 trillion KRW in investor funds flowed into the Hanjin KAL BW. The final competition rate recorded was 24.45 to 1. If 733.5 billion KRW is invested, one receives BW worth 30 billion KRW, which is 10% of the issuance amount. This corresponds to about 0.58% of the shareholding ratio. If 1 trillion KRW is invested, an additional approximately 0.8% of shares can be secured. However, since the allocation of BW can be subject to the discretion of the underwriter, it is difficult to estimate the actual amount allocated to the three-party alliance.

It is expected that Chairman Cho Won-tae's side and the three-party alliance will actively seek to secure subscription rights going forward. Securing as many subscription rights as possible is necessary to minimize share dilution caused by new share issuance. The BW issued by Hanjin KAL is detachable, meaning the subscription rights (options) to purchase new shares can be separated and traded.

The number of newly increased shares due to Hanjin KAL's BW issuance is about 3.63 million shares, approximately 5.79% of the total shares. Currently, the three-party alliance's shareholding ratio in Hanjin KAL is estimated at 45.23%, while Chairman Cho's side holds about 41%. An industry insider predicted, "Due to the share competition between the two parties, the price of subscription rights is likely to surge sharply."