[Funding] HDC I'Park Mall Issues 30 Billion KRW New Hybrid Capital Securities for Financial Improvement

Yongsan I'Park Mall Exterior View

[Asia Economy Reporter Lim Jeong-su] HDC I'Park Mall (I'Park Mall), which has been in a state of complete capital erosion for 16 years, has issued 30 billion KRW worth of hybrid capital securities (perpetual bonds). It is interpreted that the perpetual bonds were issued to improve the financial structure without burdening the parent company HDC (formerly HDC Hyundai Development Company).

According to the investment banking (IB) industry on the 5th, I'Park Mall recently issued 30 billion KRW worth of 30-year maturity perpetual bonds. The issuer holds a call option (early redemption right) and can redeem early from March 2023.

There is no obligation for early redemption until maturity, and the maturity can be extended further. However, if early redemption is not made, the interest burden increases stepwise in a step-up structure. The initial issuance interest rate is 6.80%. If early redemption fails, the interest burden increases to over 7%.

I'Park Mall issued the perpetual bonds through a private placement. This is because it is difficult to issue public bonds due to low credit rating. Kiwoom Securities, which acted as the underwriter, is known to have purchased all the perpetual bonds and then sold them to investors.

I'Park Mall has continued a net loss for a long time and has been in a state of complete capital erosion for 16 consecutive years since 2005. Although the scale of capital erosion has decreased as it has posted profits in recent years, it still has not escaped from complete capital erosion where liabilities exceed total assets.

Meanwhile, the debt burden has significantly increased due to the expansion and renewal construction of Yongsan I'Park Mall. Even after the completion of the construction, cash flow has deteriorated due to COVID-19 and other factors, so the debt burden has not decreased. Net borrowings increased from about 225 billion KRW at the end of 2015 to 770 billion KRW at the end of last year. This figure includes lease liabilities of 339 billion KRW included in borrowings due to changes in accounting standards.

An IB industry official said, "I'Park Mall chose perpetual bonds as a way to improve financial conditions such as debt ratio without capital injection from the parent company."

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