Alvogen Korea Affiliate Raises 150 Billion Won Through Equity Collateral for Voluntary Delisting

For Repayment of Borrowings and Acquisition of New Pharmaceutical Distribution Rights

[Asia Economy Reporter Lim Jeong-su] Alvogen Korea Holdings, a pharmaceutical holding company, and its 100% subsidiary Alvogen Korea have raised approximately 150 billion KRW by pledging shares of Alvogen Korea as collateral. The funds are reportedly intended to repay borrowings incurred during the voluntary delisting process and to be used for acquiring new drug distribution rights.

According to the investment banking (IB) industry on the 11th, Alvogen Korea Holdings and Alvogen Korea borrowed 100 billion KRW and 50 billion KRW respectively. The lending consortium, including banks, invested 120 billion KRW, and a special purpose company (SPC) established under the management of Korea Investment & Securities invested 30 billion KRW. The loan maturity is three years, with interest rates adjusted quarterly based on the negotiable certificate of deposit (CD) rates.

Korea Investment & Securities, participating as a major lender, issued securitized bonds worth 30 billion KRW based on the principal and interest repayments over three years by the two companies. They also provided credit support to inject liquidity into the SPC if the Alvogen affiliates fail to repay the borrowings on time.

To secure the funding, Alvogen Korea Holdings pledged its shares in Alvogen Korea as collateral. They also agreed that if additional funds are raised through a paid-in capital increase or subordinated loans, the borrowings will be repaid early by the corresponding amount. This reflects the lenders' stance not to tolerate a decline in the collateral value of the pledged shares.

Currently, Alvogen Korea Holdings owns 100% of Alvogen Korea's shares. The major shareholder of Alvogen Korea Holdings is the Taiwanese corporation Lotus Pharmaceutical Co., Ltd, which holds 100% of the holdings shares and is an affiliate of the U.S. generic pharmaceutical company Alvogen.

Alvogen Korea Holdings plans to use the raised funds to repay borrowings. Until 2018, its own borrowings were only in the 50 billion KRW range, but borrowings increased during the process of pursuing Alvogen Korea's delisting.

Alvogen Korea Holdings successfully completed the voluntary delisting of Alvogen Korea last year. Alvogen Korea was designated as a management item in 2017 for failing to meet stock distribution requirements, and again in 2018, it failed to meet distribution requirements, ultimately leading to delisting. Instead of distributing holding company shares to shareholders opposing the delisting, it purchased the shares held by them in cash.

Some have criticized that the company was deliberately designated as a management item, causing a stock price decline and resulting in direct and indirect damages to other shareholders. After delisting, there were concerns about the possibility of large-scale dividends and suspicions of a 'mukjji' (asset stripping) by the foreign company.

Alvogen Korea plans to use the funds for acquiring drug distribution rights and other purposes. An industry insider said, "Since acquiring Geunhwa Pharmaceutical, Alvogen has shown a pattern of expanding its business by maximizing leverage of its domestic affiliates while minimizing additional capital input," adding, "This borrowing will also be used to expand the pharmaceutical portfolio."

Meanwhile, Alvogen Korea was established in 2015 through the merger of Geunhwa Pharmaceutical and Dream Pharma, a Hanwha Group affiliate, by Alvogen. Alvogen entered the domestic pharmaceutical market by acquiring Geunhwa Pharmaceutical in 2012 and acquired Dream Pharma from Hanwha Group in 2014.

This content was produced with the assistance of AI translation services.