Jeju Air Exercises Call Option for 36.4 Billion Won Perpetual CB

[Financial News] Jeju Air has decided to exercise the call option (preemptive purchase right) at the end of June for the 36.4 billion won perpetual CB (convertible bond) received from the Key Industry Stabilization Fund.
The fund was established with a limit of 40 trillion won to support key industries such as aviation, shipping, automotive, shipbuilding, machinery, steel, refining, aircraft manufacturing, and petrochemicals during the COVID-19 period. Only 1.2 trillion won has been invested until October 2024, and it is expected to be liquidated as the operation period ends this year.
On the 29th, a Jeju Air official stated, "We plan to fully repay the perpetual CB of the fund with our own liquidity funds."
Jeju Air received 182.1 billion won from the fund. Loans totaling 145.7 billion won were executed in two installments. The interest rates were 2.98% and 3.82% per annum, respectively. They have already been repaid.
The perpetual CB, with a maturity of 30 years, is worth 36.4 billion won. The coupon rate is 5%. The call option can be exercised from the end of June, and if not exercised, an additional interest rate of 2.5% per annum will apply as a 'Step up'. A step-up means that the interest rate increases after a certain period following the bond issuance. Additionally, if the call option is not exercised, Jeju Air will face management constraints such as not being able to raise employee salaries and having to maintain employment.
Regarding this, a senior official from AK Holdings explained, "Jeju Air intended to repay the fund's money in advance. If not repaid, there are many management disadvantages."
Previously, Asiana Airlines received support of 300 billion won from the fund. The 240 billion won loan (7.6% annual interest) and 62.2 billion won perpetual CB (7.3% annual interest) had the same call option exercise date and step-up conditions as Jeju Air.
However, with Korean Air's acquisition of Asiana Airlines at the end of 2024, the fund's money was repaid. It is known that the fund's committee allowed early repayment.
While Jeju Air is preparing to repay the fund's money, the situation of its parent group, Aekyung Group, is not easy. Aekyung Group has selected Samjeong KPMG as the sales manager to sell 63.38% of Aekyung Industry's shares held by AK Holdings (45.08%), Aekyung Asset Management (18.05%), and related parties.
The market capitalization of Aekyung Industry is 391.1 billion won based on the closing price on the 27th. The substantial sale share value exceeds 247.8 billion won when applying the 63.38% stake being sold. However, it is known that Aekyung Industry hopes for a price around 600 billion to 700 billion won, including a management premium. The investment banking (IB) industry sees a price below 500 billion won as reasonable. The industry itself is on a downward curve, reducing its attractiveness.
AK Holdings also raised 130 billion won by pledging about 33% of Jeju Air's shares for the purpose of participating in Jeju Air's capital increase in September 2022. This was from KB Kookmin Bank, Hana Bank, Woori Bank, and Woori Investment & Securities. The collateral maintenance ratio is at the level of 120-180%ggg@fnnews.com Kang Gu-gwi Reporter