3rd CB Conversion Price Drops from 6,221 Won to Minimum Limit of 4,976 Won
Cash Assets in Q1 at 15 Billion Won... Less Than 2nd and 3rd CB Balance of 16.4 Billion Won
Early Repayments Surge for 2nd CB... 3rd CB Repayment Requests Could Become a Burden
The conversion price of Allico Pharmaceutical's 3rd tranche convertible bonds (CB) has fallen to the minimum limit. Early redemption requests are continuing for the 2nd tranche CB, which has already dropped to the minimum limit. With Allico Pharmaceutical's stock price below the conversion prices of both the 2nd and 3rd tranche CBs, if early redemption demands arise for the 3rd tranche as well, the financial burden is expected to increase.
According to the Financial Supervisory Service's electronic disclosure system on the 11th, Allico Pharmaceutical announced that the conversion price of the 2nd tranche CB has decreased from 6,221 won to 4,977 won due to a decline in market price. The lowered conversion price is the minimum limit. As a result, the number of shares that can be issued increased from 1,607,458 shares to 2,009,242 shares, accounting for 13.38% of the total 15,013,391 shares.
Allico Pharmaceutical issued 10 billion won worth of CBs in November 2023 to use as operating funds for purchasing raw materials and other company operations. The nominal interest rate is 0%, and the maturity interest rate is 1%. The conversion request period is from November 10 this year to October 10, 2028. At the time of issuance, the stock price remained in the 6,000 won range. However, due to a sharp decline in operating profit last year and a transition to a loss in the first quarter of this year, the stock price continued to fall. Consequently, the CB conversion price was lowered to the minimum limit.
In the first quarter, Allico Pharmaceutical recorded sales of 44.35491 billion won and an operating loss of 1.53801 billion won. Sales increased by 6.7% compared to the same period last year, but operating profit turned to a loss. The main cause was a decrease in gross profit due to rising cost of sales.
Early redemption requests are continuing for the 2nd tranche CB as well. Allico Pharmaceutical issued 10 billion won worth of 2nd tranche CBs in 2022. The conversion request period for this CB is from February 18 last year to January 18, 2025. The conversion price of the 2nd tranche CB was lowered to 6,242 won in August 2023, which was the minimum limit.
Since there has been no rebound in the stock price, CB investors have opted for early redemption instead of stock conversion. In February and May of this year, early redemptions totaling 3.6 billion won were made in two installments: 2.8 billion won in February and 0.8 billion won in May. The remaining balance is 6.4 billion won. On the 10th, Allico Pharmaceutical's stock price was 4,720 won, which is more than 30% below the conversion price. Additional early redemption is possible.
The problem arises if investors demand CB redemption for the 3rd tranche following the 2nd tranche. As of the first quarter of this year, Allico Pharmaceutical's cash and cash equivalents amount to 15.0471 billion won. The total remaining amount of the 2nd and 3rd tranche CBs is 16.4 billion won. Since this exceeds Allico Pharmaceutical's cash and cash equivalents, if all are demanded for redemption, it is expected to place a financial burden on the company. This is why the future direction of Allico Pharmaceutical's stock price has become important. The difference between the 3rd tranche CB conversion price and the current stock price is about 5%.
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