[Funding] LVMC Faces Growth Slowdown Due to COVID-19 Impact

Raising Funds for Debt Repayment through Shareholder-Allocated Capital Increase
Sales Decline for 2 Years Due to COVID-19... Debt Repayment via External Financing

[Asia Economy Reporter Hyungsoo Park] LVM Co., which had been struggling due to the COVID-19 pandemic, has raised funds for debt repayment through a rights offering to shareholders. LVM plans to improve its financial structure through the capital increase and reduce interest expenses to enhance profitability.

According to the Financial Supervisory Service on the 23rd, LVM will raise 48 billion KRW through a rights offering allocating 0.24 new shares per existing share, followed by a general public offering for any unsubscribed shares. The planned issue price for the new shares is 2,045 KRW, and a total of 23.5 million shares will be issued.

Chairman Oh Se-young, the largest shareholder, will acquire 40% of the allocated shares. If the capital increase is completed as planned, Chairman Oh's stake will decrease from 32.2% to 28.6%.

LVM is a holding company established in the Cayman Islands to list its subsidiary Auto World on the Korea Exchange. Auto World has grown by selling used cars in Laos since 1997. It later signed contracts with Hyundai and Kia to sell new cars as well. As LVM expanded its business areas, the number of subsidiaries increased to 15.

With lockdowns continuing in Laos, where 60% of total sales are generated, LVM's performance also suffered. Auto World, LVM's major subsidiary, recorded sales of 218.89 million USD in 2019 but has seen declines amid the COVID-19 pandemic. Sales were 134.71 million USD in 2020 and 91.78 million USD in 2021. The global logistics crisis caused by the pandemic dealt a direct blow. Additionally, depreciation of the Lao kip (LAK) caused foreign exchange losses, worsening profitability.

LVM's sales decreased from 312.06 million USD in 2019 to 232.37 million USD in 2020 and 179.01 million USD in 2021. For the first three quarters of this year, sales reached 145.18 million USD, a 13.9% increase compared to the same period last year. Operating losses narrowed to 3.66 million USD from 13.8 million USD in the previous year.

Due to continued poor performance, LVM raised 190.5 billion KRW externally over eight rounds in three years since 2019. The funds raised were mainly used to repay debts. As of the end of the third quarter, the debt ratio stood at 54.7%. Short-term borrowings amounted to 108 million USD, approximately 140.7 billion KRW when converted.

LVM will use 28.2 billion KRW of the public offering proceeds to repay short-term borrowings and private bonds. Separately, 8 billion KRW will be used to pay accounts payable, and 8.7 billion KRW will be allocated to repay long-term borrowings.

Any remaining unsubscribed shares after the rights offering and general public offering will be acquired by the lead underwriter and the underwriting group. A 15.0% underwriting fee must be paid on the amount for the remaining shares acquired. The scale of funds raised may decrease by the amount of the underwriting fee.

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