[After CB Issuance] "Approaching Lowest in Less Than a Year"... Concerns Over KBI Metal Overhang

[Asia Economy Reporter Yoo Hyun-seok] KBI Metal's 3rd series convertible bonds (CB) issued last June have fallen close to the lowest adjusted price in less than a year. The potential sell-off volume, which was nearly 18% of the total shares at the time of issuance, has increased to 23%, raising concerns about overhang (potential sell-off volume).

According to the Financial Supervisory Service's electronic disclosure on the 8th, KBI Metal adjusted the conversion price of the 3rd series CB from 2,315 won to 1,974 won on the 25th of last month. This is the second conversion price adjustment announcement this year. On August 25, it was announced that the conversion price was lowered from 2,538 won to 2,315 won.

Although the CB conversion price adjustment announcement has only been made twice, the price has fallen near the minimum adjustment limit of 1,777 won. The reason is a sharp decline in the stock price. On May 17, KBI Metal's closing price was 2,685 won. The stock price even rose to 3,265 won intraday on June 22. However, the stock price has continued to decline since then, falling to the 1,700 won range in November. As a result, KBI Metal's conversion price has also rapidly decreased. The closing price on the previous day was 1,930 won.

In May last year, KBI Metal issued 15 billion won worth of 3rd series CB. The coupon and maturity interest rates are 0%. The maturity date is May 25, 2026. The conversion price at issuance was 2,538 won, and the conversion request period is from May 25 next year to April 25, 2026. The company stated at the time that the funds would be used for operating expenses such as raw material purchases.

In particular, the sharp drop in the stock price has increased concerns about overhang. The initial issuance volume was 5,911,650 shares, accounting for 17.93% of the total shares (32,950,848 shares). However, due to two conversion price adjustments, the issuable volume increased to 7,598,784 shares. This is a large volume accounting for 23.06% of the total. If the conversion price falls to the minimum, the issuable volume will approach 26% of the total.

KBI Metal is a company that manufactures and sells CORE (magnetic cores), which are parts of motors and transformers, and non-ferrous metals. It has automotive electronics, metal, and wire business divisions. Up to the third quarter, it achieved cumulative sales of 499 billion won and an operating profit of 10.7 billion won. Compared to the same period last year, sales increased by 38.07%, while operating profit decreased by 5.8%.