[After CB Issuance] TerraScience CB Continuously Released①

Issued 3 More Times After 12th Round
Approximately 35 Billion KRW Worth of CB Remaining... 20% of Total Shares

[Asia Economy Reporter Yoo Hyun-seok] The convertible bonds (CB) of Terra Science are likely to be sequentially released until next year. This is because the CBs issued four times from May last year to April this year are reaching their conversion dates at intervals of 3 to 4 months. Concerns about overhang (potential sell-off volume) are also emerging as the newly issuable shares exceed 20% of the total.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 2nd, Terra Science announced on the 25th of last month that the conversion rights for the 12th series CB had been exercised. The scheduled listing date is the 21st of this month.

Terra Science issued the 12th series anonymous, interest-bearing, unsecured private placement CB worth 5.5 billion KRW on May 25 last year. The nominal interest rate was 0%, and the maturity interest rate was 3.0%. The subscribers were Hans Investment and Lee & Partners. The raised funds were planned to be used with 2.5 billion KRW for operating capital and 3 billion KRW for acquiring securities of other companies.

The issue price of the 12th series CB was 1,672 KRW, but due to a capital increase, it was adjusted once, lowering the conversion price to 1,658 KRW. The volume to be released this time is a total of 1,326,899 shares, accounting for 1.92% of the total shares. The amount is 2.2 billion KRW. The remaining balance is about 3.3 billion KRW.

The issue lies in the volume that can be converted in the future. Terra Science has issued three more series of CBs after the 12th series: the 13th, 14th, and 15th series.

First, in July last year, the 13th series CB worth 4.1 billion KRW was issued. The nominal interest rate was 0%, and the maturity interest rate was 3.0%. The issue price at that time was 1,672 KRW, and the conversion price was lowered to 1,658 KRW. The 13th series volume accounts for 3.59% of the total shares.

Then, in January this year, the 14th series CB worth 10 billion KRW was issued. The nominal and maturity interest rates were 2.0% and 5.0%, respectively. The issue price of the 14th series was 2,177 KRW, but it is now 2,158 KRW. It accounts for 6.73% of the total shares. Additionally, in April, the 15th series CB worth 18 billion KRW was issued. The issue price was 2,576 KRW. The nominal and maturity interest rates were 0% and 2.0%, respectively. This volume accounts for 10.14% of the total shares.

The 12th to 15th series will reach their conversion dates sequentially from this year to next year. The 12th series conversion period is from May 25 last month to May 25, 2023; the 13th series from July 24 to July 24, 2023; the 14th series from January 8 next year to December 8 of the same year. Lastly, the 15th series can be converted from April 6 next year to March 26, 2024.

Since conversion is possible over periods of about 3 to 4 months, concerns about overhang are emerging. The balances of the 13th series (4.1 billion KRW), 14th series (10 billion KRW), 15th series (18 billion KRW), and the remaining balance of the 12th series total 35.4 billion KRW. In terms of shares, this amounts to 16,084,704 shares, which corresponds to 23.35% of all shares issued so far.

Terra Science's closing price the day before was 2,095 KRW, and if the current stock price continues, investors of the 12th and 13th series CBs are expected to convert to shares as they can gain about 26% profit. Although the stock price is below the conversion price for the 14th and 15th series, their respective minimum adjusted prices are 100 KRW and 1,803 KRW, so conversion is still possible depending on 'repricing' or stock price trends.

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