[Funding] Ewha Electric Repays Debt Through Capital Increase and Builds New Factory①

[Asia Economy Reporter Hyungsoo Park] Ewha Electric has taken steps to improve its financial structure through a rights offering. Following the procurement of 80 billion KRW last year through a rights offering, convertible bonds, and bonds with warrants, fundraising has continued this year as well.

According to the Financial Supervisory Service's electronic disclosure system on the 22nd, Ewha Electric will issue 48 million new shares at 909 KRW per share. The total offering size amounts to 43.6 billion KRW, which corresponds to 40% of Ewha Electric's market capitalization of 102 billion KRW.

The funds raised will be used for debt repayment and factory construction. As of the end of last year, Ewha Electric had borrowed 33.4 billion KRW from financial institutions and spent 3.1 billion KRW annually on interest expenses. The debt dependency ratio stands at 21.47%, and the debt-to-equity ratio is 40.59%. Ewha Electric borrowed 25.35 billion KRW in facility funds from NongHyup Bank at an interest rate of 2.8%, with maturity on the 19th of next month. Ewha Electric plans to use 24.832 billion KRW of the funds raised through the rights offering to repay debts.

The remaining 18.1 billion KRW will be used for constructing a new factory and maintaining existing aging facilities. Ewha Electric produces its main business products?uninterruptible power supplies (UPS), rectifiers, molded transformers, frequency converters, and power supplies?at its Gonjiam factory. In anticipation of increased demand following COVID-19, expansion is underway. The company is also considering a new business in manufacturing secondary battery packs. Synergy effects are expected among its affiliates EQCell, KIT, and GI. EQCell possesses technology for automating secondary battery pack processes, KIT manufactures equipment for secondary battery cathode material production processes, and GI has technology to develop equipment for the entire logistics process of secondary battery manufacturing. The new factory is being considered near Suwon City, Gyeonggi Province.

Ewha Electric’s largest shareholder, Etron, will participate in the subscription of more than 50% of its allocated shares in the rights offering. Etron holds a 19.90% stake in Ewha Electric. EID is the largest shareholder of Etron with a 9.47% stake, and Ewha Electric is the largest shareholder of EID with a 20.44% stake, forming a circular shareholding structure.

Ewha Electric holds 40 billion KRW worth of the 12th series convertible bonds issued by EID. The conversion price of EID’s convertible bonds is 439 KRW, while the current EID stock price is below the par value of 200 KRW. The EID stock price has fallen nearly 40% from 302 KRW at the end of last year, placing a financial burden on Ewha Electric. Ewha Electric recorded the book value of its EID shares at 62.2 billion KRW as of the end of last year.