[Corporate Financing] Ildong Hyaltech Secures Liquidity with Support from Ildong Holdings

[Asia Economy Reporter Lim Jeong-su] Ildong Hyaltech, a hyaluronic acid and filler manufacturer affiliated with the Ildong Group, secured liquidity with the support of Ildong Holdings, the group's holding company. The procured funds are reportedly planned to be used for repaying short-term borrowings.

According to the investment banking (IB) industry on the 11th, Ildong Hyaltech received a loan of 6 billion KRW from a special purpose company (SPC) established under the management of Shinhan Investment Corp. The loan has a maturity of one year and is to be repaid in a lump sum at maturity.

Shinhan Investment Corp. executed the loan through the SPC and issued short-term bonds backed by the principal and interest repaid by Ildong Hyaltech as the underlying assets. The short-term bonds will be reissued every three months over the next year.

Ildong Hyaltech is still unable to raise funds independently due to its small corporate size and minimal performance. Therefore, Ildong Holdings, the holding company, provided a payment guarantee for Ildong Hyaltech's loan.

Additionally, Shinhan Investment Corp., the underwriter, agreed to provide liquidity support to the SPC up to 6.1 billion KRW in case of emergency. This means that if Ildong Hyaltech fails to repay the principal and interest on time, funds necessary for repaying the short-term bonds will be supplied to the SPC.

Ildong Hyaltech was established in 2016 as a newly created company through a physical division of the hyaluronic acid and filler business division from Ildong Holdings. Since the division, Ildong Holdings has continuously held 100% of the shares.

The company has been running at a loss for five consecutive years since its establishment. The accumulated deficit over four years amounts to approximately 9.4 billion KRW. Borrowings have steadily increased from 16.5 billion KRW at the time of establishment to 20.9 billion KRW at the end of last year. Most of the borrowings, 19.5 billion KRW, are short-term borrowings that must be repaid or refinanced within one year.

An IB industry official analyzed, "It is understood that liquidity was secured to repay short-term borrowings," adding, "Since losses continue, it is still difficult for the company to independently respond to the maturity of borrowings."