Detachable BW with Underwriter’s Full Commitment
Separate Structure of Bonds and Warrants
Offers Shareholders Both Interest Income and Capital Gain Opportunities
On June 16, L&F announced through a disclosure on the Financial Supervisory Service’s electronic disclosure system that it has decided to issue a total of 300 billion won in detachable bonds with warrants (BW) to support mid- to long-term growth and enhance financial flexibility.
The maturity of the BW is five years. The coupon rate is 1%, and the maturity interest rate is 3%. The exercise price for the warrants is 52,002 won, which is 3.7% higher than the closing price of 48,200 won on the same day. The minimum adjustable exercise price is 35,002 won. Investors can exercise an early redemption right (put option) starting two years after the BW issuance date.
L&F stated that the funds raised will be used as 50 billion won each for facility and operating capital, and 200 billion won for acquiring securities of other companies. The capital for acquiring securities of other companies will be invested in a new lithium iron phosphate (LFP) production subsidiary, which is scheduled to be established through a board meeting in July or August.
Bonds with warrants (BW) are financial instruments that combine bonds and warrants (the right to purchase new shares at a predetermined price within a certain period), and thus possess characteristics of both bonds and stocks.
This detachable BW will be issued using a “shareholders’ priority allocation followed by a public offering” method, giving existing shareholders preferential subscription rights, while any unsubscribed shares will be offered to general investors. Notably, even if there are unsold shares, the underwriting syndicate will purchase the entire remaining amount, effectively securing the capital raising.
Detachable BW allows the warrants and bonds to be separated and traded independently, enabling investors to tailor their investment strategies according to their own capital management plans or market outlook. If investors hold only the bonds, they can expect principal protection at maturity and an annual compound interest rate of 3%. If they exercise the warrants, they may realize gains from future share price increases.
An L&F representative stated, “This detachable BW will play an important role not only in strengthening our capital base and improving financial soundness, but also in securing growth momentum through the expansion of our product portfolio.” The representative added, “The funds raised will be used for investment in a separate LFP cathode material subsidiary or for direct investment, as well as for operating capital for the nickel cobalt manganese (NCM) cathode material business.”
The representative continued, “Even after the BW issuance, we plan to pursue improvements in our financial structure through active efforts to boost our share price, including performance growth and additional order activities.”
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