“Put options exercised on 100% of CBs amid weak share price” ... Hanse MK faces ₩10.4 billion repayment burden exceeding cash holdings [fn Market Watch]

[Financial News] Investors exercised their right to early redemption (put option) on the entire ₩10 billion of convertible bonds (CBs) issued by fashion company Hanse MK two years ago. With the share price far below the conversion price, investors are understood to have opted to recover principal and interest rather than convert the bonds into shares.
According to investment banking (IB) industry sources on the 12th, investors who bought the CBs issued by Hanse MK in October 2024 have sought early redemption of the entire amount.
The company must therefore make an early repayment of ₩10,407,070,000 in principal and interest on the 15th.
The CBs were issued on October 15, 2024, and mature on October 15, 2029. They carry a 0% coupon, but have a guaranteed annual return of 2%.
The weak share price is cited as a key reason for the early redemption. The CB conversion price was adjusted following a paid-in capital increase and a reverse stock split, and now stands at ₩3,116 per share.
By contrast, Hanse MK’s share price has recently remained in the ₩1,300 range. With the conversion price at least twice the share price, investors are understood to have chosen repayment of principal and interest over conversion into shares.
The question is how to fund the repayment. As of the end of June, Hanse MK had ₩9,291,230,000 in cash and cash equivalents on a standalone basis, less than the ₩10.4 billion due on the CBs. Adding ₩3,060,910,000 in other current financial assets brings the total to approximately ₩12.35 billion, but those financial assets consist entirely of time deposits pledged as collateral, limiting the company’s ability to use the funds freely. The company plans to fund the CB repayment with its own funds and borrowings.
Despite improved results, financial pressure remains. Hanse MK reported standalone operating profit of approximately ₩1.056 billion in the first half of this year, turning a profit after an operating loss of ₩7.556 billion in the same period last year. Its net loss also narrowed from approximately ₩19.1 billion to ₩10.4 billion, but it remained in the red.
However, the company returned to profitability in the second quarter, posting net income of approximately ₩972 million.
The CBs acquired this time will be canceled in full. This removes the potential dilution burden from the 3,209,242 common shares that could have been issued if the bonds had been converted, equivalent to 14.76% of the total shares outstanding at the time.
Hanse MK, founded in 1995, specializes in casual and children’s apparel. It expanded its business in 2022 by merging with Hanse Dream. The company is now reorganizing its business around children’s clothing brands such as Moimoln and Playkiz Pro.
[email protected] Kim Hyun-jung Reporter