[Listed Companies at a Crossroads] Yeon E B & T Delays 3.5 Billion Won Paid-in Capital Increase to ‘Daeyang Holdings Company’

[Asia Economy Reporter Jang Hyowon] The payment date for the paid-in capital increase of Yeon-i B&T, which is currently suspended from trading, has been postponed. The target of the paid-in capital increase, ‘Daeyang Holdings Company,’ is the largest shareholder of Daeyang Metal, a KOSPI-listed company.

According to the Financial Supervisory Service’s electronic disclosure on the 7th, Yeon-i B&T postponed the payment date for the third-party allotment paid-in capital increase worth 3.5 billion KRW from June 3 to the 13th.

The initial decision date for this capital increase was May 19. Yeon-i B&T resolved to issue 3,333,333 new shares at 1,050 KRW per share, raising a total of 3.5 billion KRW through a third-party allotment. The purpose of the fund raising is to improve the financial structure and operating funds for business normalization.

Yeon-i B&T was designated for a substantial review of listing eligibility in September last year after accumulating more than 15 penalty points, resulting in a suspension of stock trading. The penalty points were due to failure to disclose and reversal of disclosures related to the cancellation of a stock transfer contract involving a change in the largest shareholder.

Subsequently, the Korea Exchange’s Corporate Evaluation Committee and the KOSDAQ Market Committee both notified Yeon-i B&T of delisting decisions. Yeon-i B&T submitted an objection, and the exchange granted a remediation period until April 10, 2023. Trading suspension continues during the remediation period.

Due to this situation, Yeon-i B&T’s share price was determined not based on market price but by the discounted cash flow (DCF) method. The share price calculated by this method was 990 KRW per share, which is 53% lower than the final closing price of around 2,105 KRW before the trading suspension. A 6.06% premium was added to set the new share issuance price.

The target of the paid-in capital increase is Daeyang Holdings Company. The largest shareholder and CEO of Daeyang Holdings Company is Ms. Lee Oksun, who holds 96% of the shares. As of the end of last year, the company had assets of 37.2 billion KRW, liabilities of 33.2 billion KRW, and equity of 4 billion KRW. Its sales were 128 million KRW, and it recorded a net loss of 2 billion KRW.

Daeyang Holdings Company is the largest shareholder corporation of Daeyang Metal, a KOSPI-listed company. It holds 6,646,007 common shares (20.54%) and 7,944,077 preferred shares (62.31%). Daeyang Metal manufactures stainless steel cold-rolled products and supplies them to home appliance companies, sinks, automotive parts, and boiler manufacturers.

Daeyang Metal recorded sales of 69 billion KRW, operating profit of 10.2 billion KRW, and net profit of 9.5 billion KRW in the first quarter of this year. Sales increased by 74% year-on-year, and operating profit rose by 670%, thanks to increased demand for high value-added precision materials.

However, Daeyang Holdings Company has borrowed 14.7 billion KRW by pledging 5,789,990 shares it holds as collateral. It borrowed from securities companies and insurance companies at interest rates between 4.7% and 6.2%, and notably took out a mortgage loan from Sangsangin Plus Savings Bank at an interest rate of 14%. This means it spends 700 million KRW annually in interest to Sangsangin alone. Since Daeyang Holdings Company has no sales of its own, it needs to raise funds through dividends from Daeyang Metal, but Daeyang Metal has not paid any dividends yet.