[CB Crisis] Yulho Faces Increased Financial Burden from New Business Investment and CB Repayment

April Issued CB Half Repaid in 7 Months
Invests 16 Billion Won in Servo Industry to Promote New Business

[Asia Economy Reporter Hyungsoo Park] Yulho, a provider of server and storage solutions, will repay 5 billion KRW of convertible bonds (CB) issued last April. The CB of Genetox, a pharmaceutical raw material manufacturer that was provided as collateral when issuing the CB, will be sold.

According to the Financial Supervisory Service's electronic disclosure system on the 28th, Yulho will repay the principal of 5 billion KRW plus interest of 211 million KRW by mutual agreement with the 5th tranche CB underwriter.

Earlier, on April 26, Yulho issued CBs worth 10 billion KRW to Sangsangin Savings Bank and Sangsangin Plus Savings Bank. The nominal interest rate and maturity interest rate were promised at 2% and 6%, respectively. At the time of issuance, the conversion price was 1,884 KRW, and it was allowed to lower the conversion price to 500 KRW if the stock price fell. Yulho provided CBs of Daehan Green Energy and Genetox, which it held, as collateral. Bondholders can exercise the early redemption right (put option) from April 26 next year, one year after the CB issuance date.

The current conversion price has dropped to 1,741 KRW, which is not significantly different from the current stock price of 1,725 KRW. Since the put option exercise period has not yet arrived and collateral is secured, it seems that the bondholders are not in a hurry to recover their investment.

Yulho is a top domestic partner with a 'Titanium' grade as a first-tier supplier of the global IT company Dell Technologies. It supplies Dell Technologies' servers, storage, and software to domestic public institutions and financial institutions. As of the end of the third quarter of this year, based on consolidated financial statements, it holds 26.3 billion KRW in cash and cash equivalents. It recorded sales of 59 billion KRW and operating profit of 300 million KRW up to the third quarter this year. Sales increased by 82.9% compared to the same period last year.

Yulho recently secured new growth engines by acquiring convertible bonds (CB) of Seobo Industry, a specialized construction temporary materials company, investing 16 billion KRW. Seobo Industry designs and manufactures aluminum formwork and Euro formwork, which are construction formworks. It rents or sells them to construction companies. It recorded sales of 60 billion KRW last year.

By investing in Seobo Industry, Yulho secured a stable manufacturing base for temporary materials. Yulho and Seobo Industry plan to strengthen sales personnel and networks targeting construction companies, which are the demand sources for construction temporary materials. They are also considering additional investments in Seobo Industry for mutual growth.

A Yulho official said, "In the case of large overseas construction projects, we judged that it would be possible to pioneer based on Seobo Industry's technology," adding, "We will strive to secure future new growth engines, led by the highly profitable and safe construction temporary materials business."