[Reporter Reading Securities Report] Inseong Information, 30 Billion Won Capital Increase... 16 Billion Won Used Only for Debt Repayment

Last Year Debt Ratio Exceeded 200%
Repayment of 15 Billion Won P-CBO Bonds
Major Shareholder Snet System 100% Participation

Inseong Information is conducting a large-scale paid-in capital increase worth 30 billion KRW. The company plans to use more than half of the funds, 16 billion KRW, to repay borrowings. This is because the debt ratio exceeded 200% as of the end of last year.

Inseong Information plans to carry out the capital increase through a rights offering followed by a general public offering for unsubscribed shares. A total of 11.3 million common shares will be newly issued at a price of 2,660 KRW per share. Through this, the company will raise a total of 30.058 billion KRW.

Inseong Information was established in 1992. It operates IT infrastructure-related businesses including IT consulting, development, operation, and maintenance. Through its subsidiaries, Highcarenet, Inseong Digital, and Inetbank, it also engages in healthcare, software wholesale, and network equipment wholesale businesses.

Inseong Information will use more than half of the funds raised from this capital increase, 16 billion KRW, to repay debt. Specifically, this is to repay 15 billion KRW worth of Primary Collateralized Bond Obligations (P-CBO) bonds issued last September through the Korea Credit Guarantee Fund. The interest rate on these bonds is 6.78%, resulting in an annual interest expense of 1 billion KRW.

The need to repay borrowings is particularly due to the worsening financial structure each year. The total debt dependency, which was only 10.61% in 2021, increased to 22.62% last year. During the same period, the debt ratio rose from 157.91% to 216.46%.

The next largest use of funds is operating capital, which will require 8 billion KRW. Specifically, 3 billion KRW will be allocated to the healthcare division, 3 billion KRW to IT managed services, and the remaining 2 billion KRW will be used for payments related to IT service business supplies.

Additionally, 6 billion KRW will be used to acquire securities of other corporations. This will be invested in the paid-in capital increase of its subsidiary Inetbank. Inetbank, established on July 1, 1997, is a network specialist company. In 2001, Inseong Information acquired 100% of its shares. Inetbank plans to use the funds raised through the capital increase for its new business of distributing high-performance computing (HPC) graphics processing unit (GPU) servers.

Meanwhile, the largest shareholder’s stake is not expected to decrease due to this capital increase. The largest shareholder of Inseong Information is Snet System, holding 18.64% of the shares. Snet System plans to participate 100% in this paid-in capital increase.