Enchem eases early-repayment burden on 14th CB, giving its finances room to breathe

[Financial News]   Enchem, a specialist in electrolytes for secondary batteries, is moving to improve its financial structure by reducing the burden of early repayment on its convertible bonds (CBs). With the court approving the amended terms agreed with bondholders, the company has gained more flexibility in managing short-term liquidity. However, observers say a genuine recovery in financial stability will depend on improving the profitability and cash-generating capacity of its global production bases.
According to Enchem on the 20th, the Jecheon Branch of the Cheongju District Court approved the resolutions passed at a bondholders’ meeting to amend the terms of Enchem’s 14th CB the previous day. The key change was the removal of the bondholders’ early redemption right, or put option, which allowed them to demand repayment of principal before maturity.
Enchem had previously passed the relevant proposal at a bondholders’ meeting on August 27 and applied to the court for approval on September 1. The decision will reduce the risk of cash outflows resulting from early repayment requests for the CB.
The industry views the move as part of Enchem’s financial restructuring. By easing the burden of early repayment, the company has lowered the immediate risk of cash outflows while securing time needed to improve business efficiency. However, since removing the put option does not extinguish the CB principal itself, the financial burden arising from future repayment and conversion terms will need to be assessed separately.
Enchem plans to use the financial leeway it has secured to reorganize its global business. It is pursuing a merger between its U.S. subsidiary, Enchem America, and Nasdaq-listed The GrowHub (TGHL) to establish a local financing base. In Saemangeum, it is also accelerating the vertical integration of key raw materials through its subsidiary EDL’s lithium salt production facility.
Ultimately, the key question is whether easing liquidity pressure will translate into actual profitability gains. Improving operating cash flow by increasing the operating efficiency of overseas production bases and lowering raw-material procurement costs is seen as a key challenge for financial normalization.
In capital markets, some say the reduction in short-term liquidity risk resulting from the CB term changes should be assessed separately from a recovery in the profitability of Enchem’s core business. A source in the investment banking industry pointed out, “Whether the overseas business reorganization and new financing are carried out will be key factors in gauging the company’s financial stability going forward.” 
An Enchem representative said, “We will faithfully fulfill the terms agreed with bondholders and restore market confidence by improving our financial structure and strengthening our business fundamentals.”


[email protected] Kim Gyeong-a Reporter