[Corporate Financing] Bando Group's 3 Companies Borrow 750 Billion Won to Subscribe to Hanjin KAL BW

Bando Development, Hanyoung Development, and Daeho Development Each Issue 250 Billion KRW Private Bonds
'Cho Won-tae VS Tri-Party Alliance' Intensify Shareholding Battle

On the 27th, reporters captured the interior of the main building of Hanjin Building in Jung-gu, Seoul, during the 'Hanjin KAL 7th Regular General Meeting of Shareholders.' Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Lim Jeong-su] Bando Group, which has entered the second round of a management rights dispute with Hanjin KAL, issued private bonds worth 750 billion KRW through three affiliates. Industry insiders believe the funds are for subscribing to Hanjin KAL’s bonds with warrants (BW).

According to the investment banking (IB) industry on the 2nd, Bando Group affiliates Bando Development, Hanyoung Development, and Daeho Development each issued private bonds worth 250 billion KRW yesterday, totaling 750 billion KRW. All have a maturity of 2 months and an interest rate of 3.50% per annum. The plan is to use the funds for a very short term and repay all borrowed funds by early September.

The IB industry views that Bando Group affiliates have injected funds into subscribing to Hanjin KAL’s BW. The three Bando affiliates that issued the private bonds have been actively purchasing Hanjin KAL shares, and the private bond issuance date coincides with the Hanjin KAL BW subscription date.

Another source explained, "The reason for setting the bond maturity to just 2 months seems to be to subscribe and receive BW allocation, then immediately repay the funds," adding, "Unless the subscription funds serve as a kind of collateral, it would have been difficult for Bando affiliates, which lack credit ratings and bond issuance history, to raise such a large amount through private bonds."

Hanjin KAL conducted a subscription for BW worth 300 billion KRW over two days from the 30th of last month to the day before yesterday. The BW issuance aims to raise funds for its subsidiary Korean Air’s rights offering. Korean Air conducted a shareholder rights offering worth 1.16 trillion KRW to respond to liquidity crises caused by the prolonged COVID-19 pandemic.

A total of 7.3 trillion KRW was gathered for the Hanjin KAL BW public offering, recording a competition rate of 24.4 to 1. The maturity is 3 years, with an interest rate of 2.00% per annum. If Bando Group invests all the funds raised into the BW subscription, it is estimated to receive about 10% of the total issuance volume, equivalent to 30 billion KRW. In terms of shareholding, this corresponds to approximately 0.5% of Hanjin KAL’s total issued shares.

Currently, the three-party alliance holds an estimated 45.23% stake in Hanjin KAL, while Chairman Cho Won-tae’s side holds around 41%. The shares increased through BW issuance amount to about 5% of the total issued shares, and the shareholding advantage may change depending on the allocation results of the warrants. Conditions such as repricing (adjustment of exercise price), which can be adjusted up to 70% in case of a stock price decline, are also favorable to investors.

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