10% Premium on Base Price, 0% Coupon and Maturity Interest Rates
Reflecting Travel Market Recovery Expectations Due to Accelerated COVID-19 Vaccine Development
Aiming to Secure R&D and Investment Funds and Expand Outstanding Shares
[Asia Economy Reporter Hyungsoo Park] Redcap Tour is issuing exchangeable bonds (EB) based on its treasury shares.
Redcap Tour announced on the 25th that it will privately issue exchangeable bonds worth 11.7 billion KRW. The underwriter of the exchangeable bonds is Hi Investment & Securities, which is expected to transfer them to institutional investors in the future.
The underlying asset for the exchangeable bonds is 497,600 shares of Redcap Tour common stock, which corresponds to 90% of the treasury shares held. The exchange price is 23,650 KRW, calculated by applying a 10% premium to the reference stock price as of the day before the board resolution. The bond’s coupon rate and maturity interest rate are both 0%.
The premium issuance and 0% interest rate conditions are favorable to the issuer. Bonds with a 0% interest rate literally have no yield, so investors can only realize profits by exchanging them for shares and then selling the shares. This is interpreted as investors focusing on Redcap Tour’s business portfolio, which has generated stable profits despite the impact of COVID-19.
Redcap Tour, which operates a business specializing in business trips and long-term car rentals, recorded cumulative sales of 166.5 billion KRW and operating profit of 17.6 billion KRW in the third quarter of this year.
A Redcap Tour official said, "During the investor presentation, we were able to confirm investors’ expectations for the recovery of the travel market due to the development of COVID-19 vaccines."
The maturity of the exchangeable bonds is three years, and the exchange rights can be exercised from one month after issuance until one month before maturity, i.e., October 27, 2023. Depending on market price fluctuations, the exchange price can be adjusted down to 90% of the issue price. Adjustments can be made every three months after three months have passed since issuance.
After adjusting the exchange price, if investors exercise all exchange rights, they can receive 552,500 treasury shares. This represents all the treasury shares held by Redcap Tour.
An official stated that the purpose of issuing the exchangeable bonds is "to secure funds for research and development and investments, and to increase the number of tradable shares."
The amount expected to be released into the market through the issuance of exchangeable bonds is about 5.8% of the total issued shares, which can increase to about 6.4% if the exchange price is adjusted.
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