PharmaResearch Bio converts KRW 29 billion in CBs into shares; focus on whether parent will increase its stake [fn Market Watch]

[Financial News] The remaining KRW 29 billion of the KRW 30 billion convertible bond (CB) issued by PharmaResearch Bio will be converted into shares in full, about a month before maturity. The CB was held by PharmaResearch, the largest shareholder, and the conversion could ease the subsidiary’s substantial cash repayment burden while further strengthening the parent company’s control. In particular, if PharmaResearch has requested conversion of its entire holding, its stake is estimated to rise from 45.94% to about 59.30%.
According to investment banking (IB) industry sources and the Financial Supervisory Service’s electronic disclosure system on the 26th, PharmaResearch Bio disclosed that conversion rights for KRW 29 billion of its fourth-series CB had been exercised on the 22nd. The CB was issued on November 26, 2021, with an initial issue amount of KRW 30 billion. The amount covered by this conversion request represents 96.7% of the original issue.
PharmaResearch Bio had previously acquired KRW 1 billion of its fourth-series CB before maturity, on November 26, 2024. With all of the remaining KRW 29 billion now converted into shares, the unconverted balance of the fourth-series CB has fallen to zero won.
The conversion price is KRW 21,105 per share, and 1,374,081 new shares will be issued through this conversion. This amounts to 32.85% of the 4,183,240 issued shares before the conversion. Once the new shares are issued, the total number of issued shares will increase to 5,557,321. The new shares will account for 24.73% of all shares after the conversion. The new shares are scheduled to be listed on the 20th of next month.
A key point of interest in this conversion is the possibility that the stake held by largest shareholder PharmaResearch will change.
PharmaResearch acquired the CB in 2021 and was reportedly still holding KRW 29 billion of the fourth-series CB until recently. Based on the existing shareholder list, PharmaResearch holds 1,921,628 shares in PharmaResearch Bio, representing a 45.94% stake. If it is confirmed that PharmaResearch converted all of the KRW 29 billion in this CB into shares, its holdings will rise to 3,295,709 shares and its stake to about 59.30%. The stake held by PharmaResearch and its related parties is also estimated to increase from 48.65% to about 61.35%.
The share conversion is also significant because it reduces PharmaResearch Bio’s cash repayment burden. The fourth-series CB matures on the 26th of next month, and both its coupon rate and maturity yield are 0%. Had the bonds remained outstanding until maturity, KRW 29 billion in principal would have had to be repaid; the conversion is seen as eliminating that repayment obligation. In particular, PharmaResearch Bio is pursuing an expansion of its second plant to increase botulinum toxin production capacity, making it important for the company to secure liquidity.

[email protected] Kim Hyun-jung Reporter