HMM, Early Redemption of 240 Billion KRW Convertible Bonds

[Asia Economy Reporter Dongwoo Lee] HMM announced on the 24th that it will fully repay early its 240 billion KRW unsecured convertible bonds (CB).

Convertible bonds are bonds that, under certain conditions, can be converted into shares at a predetermined conversion price if the stock price rises, allowing for capital gains, while if the stock price falls, only a fixed interest rate is received.

HMM issued 240 billion KRW worth of CBs with a 5-year maturity in December last year. The issuance terms included a call option for early redemption, which allows the issuing company to request early redemption if the closing price of common stock exceeds 150% (19,275 KRW) of the conversion price (12,850 KRW) for 15 consecutive trading days after one month from issuance.

Since the announcement of the CB issuance last year, HMM's stock price has been rising due to expectations of improved performance. Last year, operating profit reached a record high of 980.8 billion KRW, and recently, two ultra-large 16,000 TEU container ships were deployed early, with a total of eight ships expected to be acquired by the first half of this year.

With the stock price continuing its upward trend, it closed at 28,450 KRW on the 23rd of this month, meeting the conditions for exercising the early redemption call option. After HMM announces the exercise of the early redemption call option, investors can exercise their stock conversion rights for two weeks (March 24 to April 5) before early redemption. If bondholders do not exercise the stock conversion right within this period, 100% repayment will be processed regardless of the bondholders' intentions.

Bondholders wishing to exercise the stock conversion right should note that the Korea Securities Depository will not accept conversion requests from two business days before the exercise date of the early redemption call option, so the stock conversion right exercise period ends on April 5. Therefore, requests must be made within the period (March 24 to April 5).

The early redemption amount resulting from the exercise of the early redemption call option is scheduled to be paid through the securities accounts of the respective securities firms on April 8.

If early redemption is received, an annual interest rate of 3.0% will be paid, and if converted to common stock, based on the closing price on the 23rd (28,450 KRW), a higher return of about 121% per share at 15,600 KRW can be expected. Approximately 79% of the issued bonds have already applied for conversion.

An HMM official stated, "The early redemption exercise of convertible bonds is expected to resolve stock price uncertainty due to stock conversion and improve the debt ratio."

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