IMM Credit and Solutions’ Rationale for Investing KRW 100 Billion in Hana Micron Shares [fn Market Watch]

[Financial News] HANA Materials has completed a KRW 100 billion financing deal using its stake in Hana Micron. Rather than selling the shares outright, it issued exchangeable bonds (EBs), which IMM Credit and Solutions acquired in full. With both the coupon and maturity interest rates set at 0%, HANA Materials is effectively replacing its bank borrowings with interest-free funding, while IMM Credit and Solutions is seeking returns from a potential rise in Hana Micron’s share price.
According to investment banking industry sources on the 15th, the KRW 100 billion privately placed EB issued by HANA Materials closed the previous day. The buyer is Pipe Solution No. 5, a special purpose company (SPC) established by IMM Credit and Solutions.
The exchangeable securities are backed by 2,907,991 common shares of Hana Micron held by HANA Materials. The exchange price was set at KRW 34,388 per share, a 10% premium to the share price at the time the issuance was approved. The bonds mature in September 2028.
HANA Materials will use KRW 90 billion of the proceeds to repay existing borrowings from financial institutions, including the Export–Import Bank of Korea (Korea Eximbank), Nonghyup Bank and Korea Development Bank (KDB). The existing loans carry annual interest rates of 1.93% to 3.73%, whereas the new EB has both a coupon rate and a maturity interest rate of 0%.
IMM Credit and Solutions’ investment rationale is believed to lie in the potential for Hana Micron’s share price to rise. An investment banking industry source said, "If the share price exceeds the exchange price, the bonds can be converted into shares to generate a profit. If it does not, the investor can hold them as bonds and recover the principal. In effect, this investment combines the downside protection of a credit investment with an option on Hana Micron’s share-price upside."
HANA Materials also benefits by lowering its financing costs without immediately selling its stake in the market. If all of the EBs are exchanged, its ownership in Hana Micron will fall from 9.75% to 5.38%.
Another investment banking industry source assessed the deal, saying, "The issuer can use its listed shares to reduce financing costs, while the investor can secure a structure for recovering the principal and pursue additional returns from a rise in the share price. The EB structure aligns the interests of both sides."
Ultimately, HANA Materials used its stake in Hana Micron not as a sale asset but as a financing asset. IMM Credit and Solutions, meanwhile, effectively added an option to benefit from a rise in Hana Micron’s share price to a KRW 100 billion bond investment.
[email protected] Reporter Kim Kyung-ah Reporter