[Funding] Setopia Needs Capital to Transform into a Special Steel Company

Large-scale Fundraising to Repay Jason & Company's Debt
Improving Separate Financial Performance Through Merger
Considering Additional Fundraising if Raised Amount Is Smaller Than Planned

[Asia Economy Reporter Hyungsoo Park] Setopia is conducting a large-scale paid-in capital increase to improve its financial structure. It is raising funds necessary to absorb and merge with special steel company Jason & Company and expand production capacity. If it fails to raise funds as planned, it may seek additional financing through third-party allotment and bond issuance.

According to the Financial Supervisory Service on the 5th, Setopia is promoting a paid-in capital increase by a shareholder priority public offering worth 40.5 billion KRW. After receiving subscriptions from existing shareholders, a general public subscription will be conducted from the 7th to the 8th. The issue price of new shares is 1,040 KRW, and 39 million new shares will be issued to raise 40.6 billion KRW. This fundraising scale corresponds to 80% of Setopia’s market capitalization of 50 billion KRW.

About 16 billion KRW of borrowings to be repaid with the public offering funds are debts that Jason & Company must repay. Earlier, Setopia acquired 100% of Jason & Company’s shares in May. The absorption merger process is underway. It expected to improve the debt ratio and reduce financial costs by repaying the borrowings.

Jason & Company owns a factory with a land area of 3,097㎡ (approximately 938 pyeong) in Samjeong-dong, Ojeong-gu, Bucheon City. Through production facilities in the factory, it can produce 50,000 tons (t) annually of STS 201 and STS 430. Setopia judged that the volume ordered from Jason & Company’s customers was insufficient to produce and decided to expand production. About 9.5 billion KRW of the raised funds will be invested to acquire a plate processing factory. Plate product processing facilities will also be established.

Setopia expects that if it acquires the plate processing factory as planned, it will undergo refurbishment and begin full-scale operation from June next year. It anticipated an additional annual production of 10,800 tons. By acquiring the second factory, it expects additional sales of about 50 billion KRW, including approximately 37.8 billion KRW from plate production and about 12 billion KRW from precision material processing through rebuilding the Bucheon factory and facility investment.

This is a scenario where sales increase and profitability improve if funds are raised as planned through existing shareholder subscriptions and general public offerings of forfeited shares.

If Setopia fails to raise funds as planned, it will prioritize debt repayment. Among the debt repayment funds, it will first repay about 7.7 billion KRW of unsecured borrowings and complete the small-scale merger with Jason & Company. If fundraising is not properly achieved to the extent that even unsecured borrowings cannot be fully repaid, it will negotiate with financial institutions to extend the maturity or cover the shortfall through third-party allotment paid-in capital increase or bond issuance.

If funds for facility investment are insufficient, additional fundraising will be pursued. Failure to acquire the new factory as planned may make it difficult to achieve business plans such as strengthening competitiveness and improving performance.

As of the end of the third quarter this year, Setopia’s consolidated debt ratio was 138.22%, up 74.1 percentage points from 64.12% at the end of last year. Sales and operating losses for the first three quarters were 87.1 billion KRW and 7.6 billion KRW, respectively. Although the scale has grown through business diversification, profitability improvement has not yet been achieved.

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