ALT Co., Ltd.: 11.2 billion won of its 20 billion won CB subject to put options; refinancing with 12.2 billion won in new CBs [fn Market Watch]

[Financial News] ALT Co., Ltd., a company specializing in semiconductor back-end processing, is issuing new convertible bonds (CBs) to address early redemption of its existing CBs. Of the 20 billion won in CBs issued in 2024, 11.2 billion won has been slated for early redemption, and the company is issuing 12.2 billion won in new CBs to refinance the existing debt. After canceling 6 billion won worth of CBs through a call option exercise last September, it is effectively also moving to repay a substantial portion of the remaining debt in cash.
According to financial investment industry sources on the 4th, the principal amount of ALT Co., Ltd.'s 7th CB due for early redemption totaled 11.2 billion won, equivalent to 56% of the total 20 billion won issuance. The scheduled early redemption date is the 13th of next month. The CB is a 20 billion won private placement that ALT Co., Ltd. issued in June 2024. It matures in June 2029 and has a conversion price of 25,500 won per share. However, the closing price on the 3rd was 9,100 won, just about 36% of the conversion price. With the share price far below the conversion price, bondholders have greater incentive to opt for early redemption rather than convert the bonds into shares.
Last September, ALT Co., Ltd. exercised a call option on 6 billion won worth of its 7th CB and canceled all the bonds it acquired. The move was intended to reduce potential share conversions by recovering 30% of the issue amount early. As a result, the outstanding balance of the existing CBs fell to 14 billion won. The 11.2 billion won now slated for early redemption represents 80% of the remaining CBs. If the full amount is redeemed, the balance of the existing CBs will fall to 2.8 billion won.
The issue is the amount of cash on hand. At the end of June this year, ALT Co., Ltd. had about 8.1 billion won in cash and cash equivalents, 3.1 billion won less than the 11.2 billion won slated for early redemption. However, that figure is as of the end of the first half, so the cash on hand at the time of the actual redemption may differ. The company opted to issue new mezzanine securities to secure funds to repay the existing CBs. On the 29th of last month, it decided to issue 12.2 billion won in 8th-tranche unsecured private-placement CBs. Payment is due on the 6th, and the company plans to use all the proceeds to repay the existing CBs. The purchasers of the new CBs include Axis Focus New Technology Investment Partnership No. 1, Walnut Asset Management, HR Asset Management and Renaissance Asset Management. Among them, Axis Focus New Technology Investment Partnership No. 1 has the largest subscription amount, at 4.7 billion won.
The new CBs have both a coupon rate and a yield to maturity of 0%. They mature in November 2031, about two years and five months later than the existing CBs. However, investors can exercise their early redemption rights starting in May 2029, 30 months after issuance, so the actual repayment date could come before maturity. The conversion price is worth noting. At 15,410 won per share, the new CBs' conversion price is about 39.6% lower than the 25,500 won conversion price of the existing 7th CBs. If all the new CBs are converted into shares, 791,693 shares would be issued, equivalent to 8.12% of the existing total number of shares outstanding.
The refinancing can ease the repayment burden on the existing bonds and extend their maturity, but the possibility of equity dilution from future share conversions remains.
In particular, with the new CBs' conversion price about 40% lower than that of the existing bonds, it has been noted that potential share conversions could become a burden depending on whether the share price recovers.
Meanwhile, ALT Co., Ltd.'s performance has been improving this year. It posted consolidated revenue of 48.4 billion won and an operating loss of 7.4 billion won last year, but swung to a profit in the first half of this year, with revenue of 30.2 billion won and operating profit of 1.3 billion won. Increased testing volumes for memory controllers drove the improvement.

[email protected] Kim Hyun-jung Reporter