[Funding] Han&Co Successfully Refinances 1.7 Trillion Won Acquisition Financing Secured by Hanon Systems Shares

[Asia Economy Reporter Lim Jeong-su] Han & Company, a domestic native private equity (PE) firm, has successfully refinanced acquisition financing worth 1.72 trillion KRW using its stake in Hanon Systems as collateral.

According to the investment banking (IB) industry on the 11th, Han & Co Holdings (Han & Co), established by Han & Company to acquire shares of Hanon Systems, borrowed 1.72 trillion KRW from the lending syndicate on the same day. The loan was executed in two tranches based on the priority of the collateral rights on Hanon Systems shares pledged by Han & Co: a senior tranche of 1.54 trillion KRW and a subordinated tranche of 180 billion KRW. The loan maturity is five years, and the interest rate is understood to be in the low 4% range.

Hanon Systems Pyeongtaek Plant

Han & Co currently holds a 50.5% stake in Hanon Systems. Korea Technology Group’s Hankook Tire & Technology (formerly Hankook Tire) holds 19.49%, and the National Pension Service owns 5.58%. Hanon Systems’ market capitalization recently approached 9.2 trillion KRW as its stock price continued to rise due to favorable electric vehicle parts supply prospects. The value of Han & Co’s stake is just under 5 trillion KRW, and if all the shares held were provided as collateral for the loan, the loan-to-value ratio (LTV) is only 37% relative to the equity value.

It is reported that most of the existing lenders, including NH Investment & Securities, Shinhan Bank, and Hana Bank, participated again in this refinancing. Small and medium-sized securities firms such as Kiwoom Securities and capital companies also joined the lending syndicate. From the lenders’ perspective, the loan interest rate was somewhat lower than before, reducing profitability. However, since the total loan amount decreased compared to before and the collateral value increased due to the rise in Hanon Systems’ stock price, the repayment stability of the acquisition financing is evaluated to have improved.

Han & Company acquired Hanon Systems from the U.S.-based Visteon Group in 2015 together with Hankook Tire & Technology. At that time, a total of 3.8129 trillion KRW was invested in the equity acquisition. Partial principal recovery was made through recapitalizations in 2017 and 2019, and refinancing was pursued last year, with the final investor recruitment and payment completed on this day.

During the refinancing process, the possibility of Han & Co selling its stake in Hanon Systems was raised. The previous acquisition financing terms included a clause requiring Han & Co to maintain its status as a major shareholder, but this clause was reportedly removed during the current refinancing process.

The possibility of a third-party sale is also being discussed. An M&A industry insider said, "Hankook Tire & Technology holds a right of first refusal on Han & Co’s shares under the shareholders’ agreement (SPA), but given the current circumstances of Korea Technology Group, it seems difficult to acquire the controlling stake in Hanon Systems, whose valuation has increased," suggesting that Han & Co may recover part of its investment by selling shares to a third party.

Meanwhile, Hanon Systems achieved consolidated sales of 4.77 trillion KRW and EBITDA of 466 billion KRW in the third quarter of last year. These figures represent a slight decrease compared to the same period last year (sales of 5.19 trillion KRW and EBITDA of 589 billion KRW) due to the impact of COVID-19 and other factors.

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