EcoPro Nears 'Hwangjeju' Status, Issues Corporate Bonds with a Target of Up to 200 Billion KRW

Large-scale investment needed for overseas expansion and domestic factory expansion
Net borrowings increased from 263.4 billion KRW in 2020 to 1.8172 trillion KRW in Q1 this year
Active fundraising through affiliate CB issuance, third-party allotment rights offering, and IPO

EcoPro, the holding company of the EcoPro Group, is making its debut in the public corporate bond market, with group affiliates significantly increasing their fundraising activities. As capital needs rise due to large-scale investments such as overseas factory construction, aggressive external financing is expected.

EcoPro will conduct a demand forecast for corporate bonds worth 100 billion KRW on the 17th, with NH Investment & Securities, KB Securities, and Shinhan Investment Corp. as lead managers. This includes 50 billion KRW in 1.5-year maturity bonds and 50 billion KRW in 2-year maturity bonds. If institutional investors flock to the bond demand forecast, the company plans to increase the issuance up to 200 billion KRW.

The raised funds will be primarily used to repay high-interest stock-backed loans. EcoPro had borrowed a total of 109 billion KRW by pledging affiliate stocks as collateral to Kookmin Bank, Shinhan Bank, and Korea Securities Finance Corporation. The plan is to repay these loans and release the collateral rights on affiliate shares. Additional funds raised through increased bond issuance are expected to be used for investment and operational capital.

The investment banking industry anticipates that EcoPro will increase corporate bond financing. This is due to the need to secure investment funds for overseas expansion in the U.S. and Europe, as well as a significant increase in operational capital burdens.

EcoPro plans to build cathode material factories in Hungary and Canada through EcoPro BM, following joint overseas expansion with major clients such as Samsung SDI and SK On. Continuous capital injection will be required until commercial operation begins in 2025. Domestic facility expansions by EcoPro EM and EcoPro Innovation are also planned. Recently, the group decided to invest approximately 2 trillion KRW over the next five years in Pohang, Gyeongbuk Province.

EcoPro's aggressive investments are aimed at medium- to long-term production capacity expansion. The EcoPro Group plans to increase its cathode material production capacity from 77,000 tons last year to a total of 550,000 tons by 2026, including 230,000 tons in Korea, 180,000 tons in the U.S., and 140,000 tons in Europe.

During the investment expansion, net borrowings?total borrowings minus cash equivalents?increased from 263.4 billion KRW in 2020 to 1.8172 trillion KRW by the end of Q1 this year. Credit rating agencies expect EcoPro to face capital expenditure (Capex) burdens exceeding 1 trillion KRW annually due to domestic and overseas investments. Increased operational capital burdens from order growth have also contributed to the expansion of borrowings.

Capital-type external fundraising to offset borrowing burdens is also active. EcoPro BM recently issued convertible bonds (CB) worth 440 billion KRW to private equity firm IMM Investment and securities companies. EcoPro Innovation conducted a third-party allotment capital increase worth 361 billion KRW. EcoPro Materials, a precursor material company, is currently undergoing an initial public offering (IPO).

An investment banking industry official said, "While capital increases through affiliate rights offerings or IPOs temporarily improve the financial structure, there are limitations in fundraising through capital expansion due to governance issues. Given the large scale of planned investments, the burden of external borrowings is expected to continue increasing."

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