[CB Crisis]⑮ Noble M&B, No Buyers Even for Face Value Refixing CB

Noble M&B homepage capture.

[Asia Economy Reporter Jang Hyowon] Noble M&B is struggling to resell convertible bonds (CB) worth 8.5 billion KRW. Although there was a party that expressed interest in purchasing, they only paid the deposit and then canceled the acquisition. These CBs allow for conversion price adjustments (refixing) up to the face value, minimizing loss risk, yet no buyer has emerged, raising curiosity.

According to the Financial Supervisory Service's electronic disclosure on the 4th, Noble M&B's resale contract for the 24th series CB worth 8.5 billion KRW, signed on July 1, was canceled.

In February last year, the largest shareholder, Noble Bio, acquired 24th series CBs worth 20 billion KRW. Some were converted, but 8.5 billion KRW worth was acquired and held by Noble M&B. The CB's nominal interest rate and maturity interest rate are both 0%. It is interpreted as CBs issued for the purpose of stock conversion. Conversion has been possible since February.

Refixing is also possible up to the face value. Noble M&B's face value is 1,000 KRW. The current conversion price has been lowered several times to 2,549 KRW. As of the previous day, Noble M&B's stock price was around 2,800 KRW. Even if the stock price falls to 1,000 KRW, the conversion price can be adjusted.

Despite favorable conditions for investors, no CB buyers have appeared. The corporation named Hi&Co, which previously intended to acquire, canceled the contract despite paying a 500 million KRW deposit.

Noble M&B is an optics-specialized company designing optical systems for images applied in automotive cameras and black boxes, projection optical systems used in projection TVs and projectors, and laser system optics applied in CDs and DVDs.

As of the first half of this year, the lens business segment accounts for 55% of Noble M&B's total sales, making it a core business. However, sales have been declining annually. Lens business sales, which were 32.8 billion KRW in 2020, shrank to 17.1 billion KRW last year and further reduced to about 5.3 billion KRW in the first half of this year.

After the largest shareholder changed to Noble Bio, Noble M&B has been engaged in the bio business. Noble Bio manufactures swab products for COVID-19 diagnostic kits. They earned money from increased sales of COVID-19 diagnostic kits and acquired the listed company Noble M&B (formerly Digital Optic).

Through the distribution business of Noble Bio's swab products, Noble M&B recorded sales of about 4 billion KRW in the first half of this year. However, as COVID-19 subsides, demand for diagnostic kits is decreasing, and related sales may decline. The business outlook is not positive, which is analyzed as the reason why CB investors have not appeared.

The 26th series CB worth 30 billion KRW, issued on November 16 last year, is also increasingly likely to face redemption requests rather than conversion. The conversion price is 2,550 KRW, and refixing up to the face value (1,000 KRW) is possible, but since the 24th series CB is not being resold, the situation is similar.

However, the 26th series CB has sufficient redemption capacity. It was issued to Meritz Securities, and after issuance, Noble M&B purchased monetary stabilization bonds, entrusted them to NH Investment & Securities, and provided them as collateral for the CB to Meritz Securities. The funds raised through the CB have not been used.

The reason for issuing the CB is interpreted as securing control or CB profits for the largest shareholder or a third party through a call option (purchase request right). According to the issuance disclosure, there is no limit on the call option. It is presumed that the largest shareholder or management can take as much as they want.