[After CB Issuance] Haizeu Airlines Sees Conversion Rush as Stock Rises on Expectations for Aviation and Aerospace Industry Growth

[Asia Economy Reporter Jang Hyowon] As the stock price of aerospace parts manufacturer Haizeu Aviation surged on expectations of the Yoon Suk-yeol administration's aviation and space industry promotion policies, investors in convertible bonds (CB) and exchangeable bonds (EB) are moving to request conversions.

According to the Financial Supervisory Service's electronic disclosure on the 4th, Haizeu Aviation's first series CB worth 4.8 billion KRW was requested for conversion the previous day. The number of shares to be converted is 1,004,394, which accounts for 5.68% of Haizeu Aviation's total issued shares.

The scheduled listing date is the 20th of this month, and the conversion price is 4,779 KRW. The initial conversion price was 5,330 KRW but was adjusted downward due to a decline in the stock price. If the stock price remains at the recent level in the 6,500 KRW range until the listing date, CB investors can expect approximately a 36% return.

This month, Haizeu Aviation's stock price showed a sharp rise, fueled by expectations for the Yoon Suk-yeol administration's promotion of the aviation and space industry. Haizeu Aviation's stock price, which closed at 5,270 KRW at the end of last month, rose by 11-13% for two consecutive days and reached as high as 6,670 KRW during trading.

The first series CB was issued on April 30 last year, amounting to 12 billion KRW. The conversion period began on the 2nd of this year, one year after issuance. Coincidentally, the stock price of Haizeu Aviation surged from the day CB conversion became possible.

The CB issuance target was Simone Asset Management's mezzanine specialty fund. Since the nominal and maturity interest rates are 0%, it is interpreted that the issuance was made with conversion in mind from the start. Excluding the 4.8 billion KRW converted this time, a total of 7.2 billion KRW worth of CB remains. The number of shares convertible from this amount is 1,506,591 shares.

The purpose of raising funds through this CB was for new business investments and M&A. However, by the end of last year, Haizeu Aviation acquired Deck Aviation, a carbon composite material specialist manufacturer affiliated with Lotte Chemical, for 3 billion KRW and used 1 billion KRW as operating funds. Approximately 8 billion KRW of funds have not yet been used.

Along with the CB, exchange requests were made for EB worth 1.9 billion KRW. This EB was also issued as bonds worth 3.8 billion KRW on April 30 last year, together with the first series CB. The issuance target was the same Simone Asset Management fund. About half of it has been requested for exchange.

The EB exchange target is Haizeu Aviation's shares. With this exchange request, Haizeu Aviation will provide 300,081 treasury shares to EB investors. The exchange price is 6,390 KRW, which is similar to the current stock price. Haizeu Aviation has used all funds raised through EB for operating expenses such as research and development.

The shares exchanged through EB account for 1.7% of the total issued shares. Including shares converted through CB, about 7.38% of shares will be released into the market. Additionally, about 10% of shares have yet to be converted or exchanged.

Meanwhile, Haizeu Aviation is a company primarily engaged in the assembly and sales of aircraft-related parts. It manufactures key machined parts for the B787 wing and B737 tail fin. Last year, on a consolidated basis, it recorded sales of 62.6 billion KRW and an operating loss of 12.1 billion KRW.