[Funding] Home Center Holdings Conducts Large-Scale Capital Increase to Secure Daegu-Gyeongbuk New Airport SOC

[Asia Economy Reporter Hyunseok Yoo] Homesenta Holdings has decided on a paid-in capital increase worth 30 billion KRW. Through this capital increase, funds will be invested to secure demand in the ready-mixed concrete (Remicon) and asphalt concrete (Ascon) markets following the construction of the Daegu-Gyeongbuk Integrated New Airport. The company also plans to improve financial stability by repaying borrowings.

According to the Financial Supervisory Service, Homesenta Holdings will raise 33.5 billion KRW through a rights offering with a general public subscription for unsubscribed shares, allocating 0.504 new shares per existing share. The issue price per new share is 787 KRW, with a total of 42.56 million shares to be issued.

◆Facility investment aligned with the construction of Daegu-Gyeongbuk Integrated New Airport= Of the raised funds, 10 billion KRW will be used as facility funds. 16 billion KRW will be allocated to debt repayment, and 7.5 billion KRW will be used as operating funds.

Homesenta Holdings is a building materials company based in the Daegu-Gyeongbuk region. In September 2016, the ready-mixed concrete manufacturing division was spun off into Homesenta, and the surviving entity changed its name to Homesenta Holdings, becoming a holding company. It holds subsidiaries such as Bogwang Industry and HC Bogwang Remicon.

Homesenta Holdings is focusing on social overhead capital (SOC) necessary for the establishment of the Daegu-Gyeongbuk Integrated New Airport. Through facility investment, the company plans to preempt the Ascon and Remicon markets, which are fundamental to SOC.

The location for the Daegu-Gyeongbuk Integrated New Airport was finalized in August. Basic and detailed design services for airport construction will be conducted by 2023. Construction is scheduled to begin in 2024, with completion and simultaneous opening targeted for 2028.

Approximately 2 million pyeong (about 6.6 million square meters) of airport new town and an aviation cluster will be developed in the relocation area. Commercial and educational facilities are also expected to be built in the new town. Homesenta Holdings plans to secure Remicon and Ascon factories near the airport accordingly.

Of the 10 billion KRW, 7 billion KRW will be invested next year, and the remaining 3 billion KRW in 2022, to establish new factories and acquire existing ones. Homesenta Holdings expects to generate additional sales of 10 billion KRW and 5 billion KRW from the Remicon and Ascon businesses, respectively, through this.

◆Debt repayment of 16 billion KRW...Major shareholder’s stake slightly strengthened= Homesenta Holdings will allocate 16 billion KRW for debt repayment and 7.5 billion KRW for operating funds. Most of the borrowings to be repaid are short-term loans maturing in the second half of next year. Specifically, 625 million KRW will be repaid in April next year, followed by 5 billion KRW in July, 2.375 billion KRW in October, and 8 billion KRW in December.

As of the third quarter on a consolidated basis, Homesenta Holdings’ total borrowings amounted to 120.351 billion KRW. Among these, long-term borrowings and short-term borrowings were 23.2 billion KRW and 71.8 billion KRW, respectively. Cash and cash equivalents and short-term financial instruments held amounted to only 13 billion KRW. The debt-to-equity ratios on a consolidated and individual basis were 141.02% and 135.5%, respectively. As a holding company, Homesenta Holdings cannot hold debt exceeding twice its equity capital.

The company explained in its securities registration statement, "Considering the cash and financial assets held as of the third quarter of 2020, if the maturity of short-term borrowings cannot be extended or refinanced, the possibility of liquidity risk cannot be excluded."

The major shareholder plans to participate 100% in the paid-in capital increase. The largest shareholder, CEO Park Byung-yoon, holds a 16.22% stake (13,809,270 shares). Including shares held by special related parties, the total ownership is 52.72% (44,870,312 shares). They have decided to fully participate in the allocation of new shares.

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