[After CB Issuance] 44% of Total Convertible to Stocks... Concerns over SG Overhang

[Asia Economy Reporter Hyunseok Yoo] There is an overhang (potential sell-off volume) issue concerning the convertible bonds (CB) issued by SG. Although the conversion period for the previously issued CBs has arrived, the stock price remains below the conversion price. This accounts for about 44% of the total volume. Due to recent stock price declines, the conversion price may be further adjusted, potentially increasing the volume that could enter the market.

According to the Financial Supervisory Service’s electronic disclosure system (DART) on the 15th, the CBs issued by SG that are currently convertible are the 1st, 7th, and 9th series.

The 1st series was issued in July 2018 with a scale of 30 billion KRW. The initial conversion price was 10,426 KRW, but due to a bonus issue and stock price decline, it was lowered to 2,535 KRW, which is the limit of the refixing (conversion price adjustment).

In March of last year, the 7th series CB worth 10.5 billion KRW was issued to repay the 1st series CB and to raise operating funds. The conversion price was 1,695 KRW with no significant adjustments.

Additionally, the 9th series CB, issued in July last year with a scale of 14 billion KRW to repay borrowings, saw its conversion price lowered from 2,079 KRW to 1,869 KRW.

The conversion periods for these CBs have already begun. The 1st series conversion request period started in July 2019, while the 7th and 9th series have been convertible since March and September of this year, respectively.

However, except for some, conversion requests have not been made. For the 1st series, 4 billion KRW worth of CBs remain unredeemed; the 7th series has 3.5917 billion KRW remaining, and the 9th series has 12.9 billion KRW not yet converted. The total amounts to 20.5 billion KRW.

The currently convertible shares amount to 10,598,992 shares, which corresponds to 25.63% of the total issued shares of 41,340,267. Including the 12th series CB worth 16.5 billion KRW issued last January, which can be converted into shares starting January next year, the total convertible volume could reach 44.14%.

With SG’s stock price continuing to decline recently, the volume that could enter the market may increase further. SG’s stock price as of the previous day was 1,850 KRW. The conversion prices for the 9th and 12th series are higher than this, at 1,869 KRW and 2,157 KRW, respectively.

If the stock price fails to rebound, concerns over repayment at maturity may grow. As of the first half of this year, SG’s cash and cash equivalents stand at 16.2 billion KRW, which is insufficient compared to the CB balance of 37 billion KRW.

However, since the maturity dates of the CBs are still about 2 to 4 years away, future stock price movements will be crucial. The maturity date for the 1st series is July 23, 2023; for the 7th and 9th series, March 11, 2025, and July 9, 2025, respectively; and for the 12th series, January 19, 2026.

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