[Corporate Financing] Sampyo Group, Following Redeemable Preferred Shares, Secures Loan from Securities Firm

Refinancing of Private Bonds
Increased Borrowing Burden Due to Construction Downturn and COVID-19
Expected Rise in Capital Market Utilization

[Asia Economy Reporter Lim Jeong-su] SAMPYO Group affiliates are consecutively raising funds in the capital market. Recently, the core affiliate SAMPYO Industry issued 75 billion KRW worth of redeemable preferred shares, followed by the holding company SAMPYO borrowing 20 billion KRW from a securities firm.

According to the investment banking (IB) industry on the 27th, SAMPYO borrowed 20 billion KRW from a special purpose company (SPC) established under the management of Korea Investment & Securities. The loan maturity is 1 year and 11 months, with the principal to be repaid in a lump sum at maturity. The loan interest rate is reported to be in the mid-to-high 4% range.

The SPC that lent money to SAMPYO raised loan funds by issuing short-term bonds backed by the loan principal and interest as underlying assets. The short-term bonds are scheduled to be refinanced with a 3-month maturity. Korea Investment & Securities has agreed to take responsibility for repaying the short-term bonds on behalf of SAMPYO if investors do not appear during the refinancing process or if SAMPYO fails to repay the principal and interest on time.

The procured funds will be used to repay existing borrowings. SAMPYO issued a 2-year private bond in April 2018. The maturity of the bonds issued at that time has come due, prompting the company to secure refinancing funds. An IB industry official stated, "Most affiliates of SAMPYO Group, except for SAMPYO Cement, are unlisted companies, and bank borrowings overwhelmingly exceed capital market fundraising such as corporate bond issuance."

SAMPYO is the holding company of SAMPYO Group, with Chairman Jeong Do-won (81.90%) and his eldest son, SAMPYO Cement President Jeong Dae-hyun (14.08%), and other related parties holding 100% of the shares. In 2013, the aggregates, ready-mixed concrete, and concrete products manufacturing and sales divisions were spun off into SAMPYO Industry, transitioning to a holding company system. Currently, it has subsidiaries including SAMPYO Industry, SAMPYO Cement, SAMPYO P&C, and NRL.

Earlier, the group's main affiliate SAMPYO Industry issued 500,000 redeemable preferred shares. The issue price per share was 150,000 KRW, totaling 75 billion KRW. Shinhan Financial Investment, the underwriter, acquired the redeemable preferred shares through an SPC, but if SAMPYO Industry exercises a call option requiring transfer to a corporation or specific person designated by SAMPYO, the preferred shares can be transferred to a third party.

Industry insiders speculate that the issuance of redeemable preferred shares by SAMPYO Industry is related to restructuring of the governance or succession. A SAMPYO Group official explained, "Due to some deterioration in cash flow caused by the spread of COVID-19, we issued redeemable preferred shares to raise operating funds."

SAMPYO Group has been experiencing increasing debt repayment burdens amid deteriorating performance following the acquisition of Dongyang Cement in 2015, which increased borrowings. SAMPYO's performance worsened last year due to a downturn in the construction market, recording a net loss of 30.7 billion KRW. Consolidated borrowings exceeded 1.3 trillion KRW.

For this reason, affiliates such as SAMPYO Cement and SP Nature also raised funds in the capital market last year. A credit rating agency official said, "Due to the downturn in the construction market, it is unlikely that the building materials industry will improve in the near term," and predicted, "SAMPYO Group's capital market fundraising will gradually increase."

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