[CB Crisis] Powernet, Full Early Redemption of 10th Round CB

Issued 10 Billion CB to Bident in May Last Year
Raised 4.5 Billion by Issuing New Shares to Major Shareholder
Large-Scale Capital Outflow Amid Ongoing Facility Investments

[Asia Economy Reporter Hyungsoo Park] Powernet fully repaid the '10th series convertible bonds (CB)' issued in May last year. The company decided on a large-scale cash outflow while attempting to raise 4.5 billion KRW by issuing new shares to its largest shareholder.

According to the Financial Supervisory Service's electronic disclosure system on the 21st, Powernet repaid 10 billion KRW after consulting with the 10th series CB bondholders. The conversion price was 4,130 KRW, which is higher than the current stock price of 3,370 KRW.

Previously, Powernet issued CBs to Vident in May last year to raise 10 billion KRW. The raised funds were used for operating capital and investments. At the time of issuance, the nominal and maturity interest rates were 2.0%, and the conversion price was 5,900 KRW. A refixing clause was also included, allowing the conversion price to be adjusted down to 4,130 KRW if the stock price declined.

The stock price, which had been above 5,000 KRW, retreated to the 3,000 KRW level this year. Although conversion rights could be exercised from May, conversion did not occur because the stock price remained below the conversion price.

Powernet recorded sales of 169.6 billion KRW and operating profit of 3.6 billion KRW on a cumulative basis for the third quarter this year. Sales increased by 10.5% compared to the same period last year, but operating profit decreased by 19.9%. The cost of goods sold rose by 13.6% year-on-year due to increases in some raw material prices, worsening profitability.

Powernet is promoting a third-party allotment paid-in capital increase targeting its largest shareholder, Wijit. The new share issuance price is 2,420 KRW, with the payment date set for the 30th. By issuing 1.86 million new shares, the company plans to raise 4.5 billion KRW for facility and operating funds.

In June, Powernet issued the 11th series CB to domestic institutional investors, raising 10 billion KRW. The interest rate is 0%, and the conversion price is 4,553 KRW. The funds are planned to be used for facility investments such as the Vietnam factory and operating capital for head office business activities.

While fundraising and facility investments continue, repaying 10 billion KRW at once could lead to liquidity deterioration. As of the end of the third quarter, Powernet held 13.7 billion KRW in cash and cash equivalents. Repayment of the 9th series CB worth 10 billion KRW issued to institutional investors in February last year has not yet been made.