“Hahn & Company’s responsible management paid off...” SK D&D’s 101 billion won rights offering fully subscribed with shareholders’ participation [fn Market Watch]

[Financial News]  SK D&D has secured funds needed to improve its financial structure after completing a 101 billion won rights offering. After its largest shareholder, private equity firm Hahn & Company, invested about 79.5 billion won, minority shareholders also took part in the offering, pushing the overall subscription rate above 115%. With existing shareholders responding to the largest shareholder’s investment, debt repayment and improvements to the company’s financial structure are expected to gather pace.
According to investment banking (IB) industry sources on the 15th, subscriptions were received for a total of 51,613,927 shares in SK D&D’s rights offering to existing shareholders, which ran from the 10th to the 13th. The subscription rate was 115.52% of the 44,681,000 shares planned for issuance. The offering price was 2,260 won per share, bringing the amount raised to about 101 billion won. The new shares are scheduled to be listed on the 28th.
The key feature of the offering was the participation of both the largest shareholder and minority shareholders. Hahn & Company, which holds 78.69% of SK D&D, subscribed for its entire allocation, worth about 79.5 billion won. Existing shareholders also subscribed for 43,286,672 shares, about 97% of the number planned for issuance. Oversubscriptions added to the demand, bringing total subscriptions above the number of shares on offer.
The rights offering was structured to allocate 2.4 subscription rights for new shares for each existing share and to allow oversubscriptions of up to 20%. Existing shareholders could subscribe for up to 2.88 shares for every share they held. Depending on the subscription results, Hahn & Company’s stake is expected to rise from 78.69% to the low 80% range.
Some in the IB industry had raised concerns surrounding the offering, including business uncertainty stemming from weakening ties with SK Group and the possibility that the largest shareholder would increase its stake. However, Hahn & Company took up its entire allocation and the subscription rate among existing shareholders approached 100%, leading to assessments that shareholders had demonstrated their support for improving the company’s financial structure.
The funds raised are expected to be used to repay corporate bonds coming due and an interim-payment loan for the Gunpo Knowledge Industry Center, among other things. Repaying debt to ease short-term liquidity pressures and improve the financial structure is seen as the company’s top priority.
An IB industry source noted, “Hahn & Company, the largest shareholder, subscribed for its full allocation in the rights offering, demonstrating its commitment to responsible management. Most minority shareholders also joined the offering, creating an opportunity to normalize SK D&D’s financial structure.” The source added, “Some raised suspicions that the largest shareholder was seeking to increase its stake through the offering, but the actual results suggest that was little more than baseless speculation.” 
However, strong demand for the rights offering does not immediately mean that the company’s management has returned to normal. Whether reduced debt will lower financing costs and the company can improve the cash-generating capacity of its assets are expected to be key to stabilizing its financial structure.

[email protected] Kim Gyeong-a Reporter