Korea Zinc: "According to MBK and Youngpoong's calculation methods, their debt ratio would be 1200% if they acquire"

"Calculation Method Misunderstanding Korea Zinc's Business Structure"
"Typical Private Equity Fund Required Return 20%...
Concerns Over Asset Sales and Technology Leakage to Secure Profits"

Korea Zinc claimed that the debt ratio of the company could sharply increase after MBK Partners and the Yeongpung alliance acquire management rights.

On the 13th, Korea Zinc stated, "According to the calculation method presented by MBK and Yeongpung, the debt ratio of Korea Zinc would reach 1200% when they manage the company." Previously, MBK and Yeongpung had argued that if Korea Zinc proceeds with a share buyback, the debt ratio would reach 245% by 2030.

Korea Zinc pointed out that MBK and Yeongpung calculated the debt ratio including the investment scale of Korea Zinc's new business, 'Troika Drive.' Although this is a business conducted through Korea Zinc's subsidiaries, they assumed that the Korea Zinc main body must bear all costs. A company official said, "Calculating the debt ratio under the assumption that Korea Zinc would bear all the investment costs of Troika Drive only shows a significant lack of understanding of Korea Zinc's overall business structure."

The headquarters of Korea Zinc in Jongno-gu, Seoul, on the morning of the 11th when the board of directors held a meeting.
[Photo by Yonhap News]

Regarding the increase in debt ratio claimed by MBK and Yeongpung, Korea Zinc expressed concerns that "after acquiring management rights, excessive dividends, asset sales, and leakage of core technologies could rapidly deteriorate the financial structure." Korea Zinc particularly argued that since private equity funds aim for an internal rate of return (IRR) of over 20%, the MBK and Yeongpung alliance is more likely to focus on recovering profits rather than improving financial soundness after securing management rights.

Korea Zinc claimed that considering the capital costs incurred during the fundraising process for the public tender by MBK and Yeongpung, they would need to recover more than 236.6 billion KRW annually. On the other hand, it explained that the financial borrowing used for Korea Zinc's share buyback is expected to generate an annual financial burden of around 130 billion KRW.

Korea Zinc predicted that if MBK and Yeongpung take over management rights, the company’s credit rating would be downgraded, causing a vicious cycle of rising interest rates and increased interest expenses. Currently, Korea Zinc’s standalone debt ratio is 23%, and it has received a credit rating of 'AA+/Stable' from Korea Ratings and NICE Investors Service.