[At a Crossroads] IA① Trinotech's IPO Uncertain... Will They Repay 4 Billion Instead?

Joint Debt Guarantee if IPO Fails by June
Trino's Cash Shortage... IA Also Burdened

It appears that IA, a KOSDAQ-listed company, is at risk of having to repay 4 billion KRW in debt on behalf of its subsidiary, Trinotechnology. This is because Trinotechnology promised during past fundraising that if it failed to go public by June this year, it would repay the debt jointly with IA. However, Trinotechnology has not yet filed for preliminary review for listing.

According to the Financial Supervisory Service's electronic disclosure system on the 27th, Trinotechnology issued a total of 4 billion KRW in bonds in May 2021, including 2 billion KRW in bonds with warrants and 2 billion KRW in convertible redeemable preferred stock debt.

These bonds include a condition that if Trinotechnology fails to conduct an initial public offering (IPO) by the 30th, the bondholders can require IA to jointly purchase the bonds with an annual compound interest rate of 5%.

However, as of this day, Trinotechnology has not filed for preliminary review for listing. Considering that the average review period after filing is about six months and it generally takes around a year to complete the listing, it is already impossible for the company to go public by the 30th.

The reason Trinotechnology has not proceeded with the listing is analyzed to be due to continuously declining performance. Trinotechnology is a company that produces power semiconductor devices such as Insulated Gate Bipolar Transistors (IGBT), Metal-Oxide-Semiconductor Field-Effect Transistors (MOSFET), and diodes. IA acquired a 51% stake in 2015, making it a subsidiary.

Trinotechnology recorded sales of 14.7 billion KRW and an operating loss of 4.8 billion KRW last year. Sales decreased by 41% compared to the previous year, and operating profit turned into a loss. Looking at operating profit alone, it showed a continuous decline from 4.7 billion KRW in 2020 to 2.9 billion KRW in 2021, 800 million KRW in 2022, and a loss of 4.8 billion KRW last year.

Trinotechnology also did not proceed with the special listing for materials, parts, and equipment (SoBuJang) technology as it had declared. The special listing system allows companies with A-grade technology from a technology evaluation agency to list even if they are operating at a loss. Previously, Trinotechnology announced plans to pursue a SoBuJang special listing by signing a listing underwriting contract with Shinhan Investment Corp. in 2021.

With the expectation that it will not be able to go public by the 30th, Trinotechnology may face demands from institutional investors to repay the bonds. It is estimated that about 4.6 billion KRW, including principal, will need to be repaid according to the agreement.

However, it is estimated that Trinotechnology will not be able to repay the bonds with its own cash. According to Trinotechnology's audit report at the end of last year, cash and cash equivalents amounted to only 600 million KRW. Of the total current assets of 10.4 billion KRW, 7.8 billion KRW are inventory assets, making cash liquidation difficult.

If Trinotechnology fails to repay the bonds, IA, as the joint guarantor, will have to repay the 4 billion KRW on its behalf. However, IA's situation is also not favorable. IA recorded consolidated sales of 59.2 billion KRW and an operating loss of 10.2 billion KRW last year. The deficit continued in the first quarter of this year, and cash and cash equivalents are only about 1.6 billion KRW.

Inquiries were made to IA regarding this matter, but no response was received.