[After CB Issuance] Hansong Neotek, CB Investors Troubled by Trading Suspension

[Asia Economy Reporter Hyungsoo Park] Hansong Neotek's failure to receive an audit opinion has raised warning signs for investors who invested in convertible bonds last year regarding their investment recovery strategies.

On the 28th, according to the Financial Supervisory Service, Ichon Accounting Corporation refused to issue an audit opinion on Hansong Neotek, stating that it could not secure sufficient audit evidence to assess the validity of transactions and the appropriateness of accounting treatment related to multiple transactions, including fund transactions, within the consolidated companies.

A company official explained, "It seems that in the process of aggressively investing to secure new growth engines, some of the audit standards required by the auditor were not fully met."

With the suspension of stock trading, investors holding convertible bonds issued by Hansong Neotek in March last year are finding it difficult to recover their investments after converting to common stock.

Previously, in March last year, Hansong Neotek issued the third series of convertible bonds worth 13 billion KRW to raise funds for mergers and acquisitions (M&A) and operating capital. Zebra Investment Advisory, Hands Partners, and BFA were among the investors. The issuance terms included a nominal interest rate of 1% and a maturity interest rate of 3%. The conversion price was initially 1,640 KRW per share but was lowered to 1,470 KRW due to conversion price adjustments.

Convertible bond holders can exercise an early redemption right (put option) after one year and six months from the issuance date. If an early redemption request is made, Hansong Neotek must pay the amount including an early redemption yield of 3.0% per annum (compounded quarterly) until the early redemption payment date.

Convertible bond investors can either wait until trading resumes or exercise their early redemption rights. Just before the trading suspension, Hansong Neotek's stock price was 1,530 KRW, which is not significantly different from the current conversion price of 1,470 KRW. On the 10th, just before the trading suspension, some investors exercised conversion rights amounting to 2.07 billion KRW, converting 1.41 million shares into common stock. The shares will be listed on the 11th of next month.

As of the end of last year, Hansong Neotek's debt ratio was 108.8%, up 78 percentage points from 30.8% the previous year. Last year, the company recorded sales of 29.6 billion KRW and an operating loss of 400 million KRW. It holds 6.6 billion KRW in cash and cash equivalents.

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