[CB Crisis]⑩ iWIN Faces Cash Shortage... Is the CB Repayment Rush Starting?

[Asia Economy Reporter Jang Hyowon] When the convertible bonds (CB) issued last year by iWIN, a company listed on KOSDAQ, reached the redemption period, a redemption request was immediately made. It is analyzed that investors chose redemption because the stock price was significantly lower than the conversion price. Out of the total 12 billion KRW, 3 billion KRW was requested for redemption, and if the stock price does not rise, additional redemption requests are expected to continue.

According to the Financial Supervisory Service’s electronic disclosure on the 24th, 3 billion KRW out of the 12 billion KRW third series convertible bonds issued by iWIN on October 21 last year were early redeemed due to the exercise of the investor’s put option (redemption right). The redemption request was made immediately after one year from the issuance date, which is the earliest date the put option could be exercised. The third series CB was issued to Cubrix, but was immediately acquired by SangSangin Savings Bank and SangSangin Plus Savings Bank. The nominal interest rate was 1%, maturity interest rate 5%, and the purpose of fundraising was to secure operating funds.

The conversion price of this CB was 8,918 KRW at the time of initial issuance. Due to free stock dividends and a decline in market price, it was lowered to the refixing minimum limit of 3,036 KRW. Nevertheless, iWIN’s recent stock price has been moving in the 1,600 KRW range, which means investors would incur losses if they converted to stocks. Therefore, it is interpreted that CB investors chose redemption. Also, from the 21st, early redemption can be requested every three months, so if the stock price remains below the conversion price, redemption requests for the remaining 9 billion KRW may also come in.

It is uncertain whether iWIN can adequately respond to the CB put option. As of the end of the first half of this year, it holds 11.6 billion KRW in cash equivalents and 10.5 billion KRW in other financial assets. This cash was raised by issuing the fourth series CB worth 17 billion KRW in May. iWIN invested 12.3 billion KRW of this fund in a paid-in capital increase of its affiliate iWIN Plus in August and used some for operating funds. Including cash and financial assets held, the available cash is only about 9.8 billion KRW. If the remaining 9 billion KRW of the third series CB is requested for redemption all at once in the future, cash shortages may occur.

It is also difficult to secure cash by earning money through business operations. iWIN is a company mainly engaged in manufacturing automobile seat heaters. In the first half of this year, on a separate basis, it recorded sales of 43.5 billion KRW, operating profit of 600 million KRW, and net profit of 1.1 billion KRW. Notably, it poured about 40 billion KRW into acquiring shares of iWIN Plus, for which it raised 39.5 billion KRW in short-term borrowings in the first half alone. The interest rates range from 2.58% to 3.84%, resulting in annual interest expenses exceeding 1 billion KRW. It is a structure where it is difficult to steadily accumulate earned money.

iWIN plans to minimize the exercise of put options through negotiations with creditors. A company official said, “Since the period for CB investors to exercise put options remains, we are exploring various methods including negotiations with creditors.”