Taekwang Industrial Fully Withdraws Exchangeable Bond Plan... "Mid- to Long-Term Investments Will Continue"

Considering Market Changes and Sharp Stock Price Decline
Business Restructuring Unavoidable Due to Sluggish Performance of Existing Operations
Investment Plans Maintained... Exploring Funding Options Including External Borrowing

Taekwang Industrial has completely withdrawn its plan to issue exchangeable bonds (EB) backed by treasury shares. This comes about five months after the board of directors resolved at the end of June to issue EBs linked to the disposal of treasury shares. The company stated that the decision was made after comprehensively considering the sharp drop in stock price, changes in market conditions, and shareholder opinions. Although the plan was initially chosen as a means to raise funds for new business initiatives, Taekwang Industrial determined it would be difficult to push ahead with the original plan as even government policy direction shifted.

On November 24, Taekwang Industrial announced via a public disclosure that it would withdraw its decision, initially disclosed on June 27, to issue exchangeable bonds and dispose of treasury shares. At the time, the company needed to secure funds amid a business restructuring process, and issuing EBs backed by treasury shares was considered the most rational option given the stock price situation. This decision was also validated from a management perspective when the court dismissed a minority shareholder’s injunction application.

Illustration of the dispute regarding the injunction application for the issuance of exchangeable bonds between Taekwang Industrial and Truston.

However, during the injunction proceedings, the company's stock price fell rapidly, increasing the cost of raising funds. While the stock price had risen to the high 1 million won range at the end of June, it had dropped to about 777,000 won as of the previous day's closing price. Taekwang Industrial explained that negotiations with counterparties to adjust the issuance terms were also delayed, making it impossible to secure funds quickly.

Taekwang Industrial also cited the government's strengthened focus on shareholder value enhancement policies centered on treasury share cancellation as a reason for the withdrawal. The company stated, "This is a comprehensive decision that takes into account market conditions, government policy direction, and the opinions of stakeholders."

The reason Taekwang Industrial had pursued the EB issuance was to restructure its business portfolio to reverse the deteriorating performance of its traditional petrochemical and textile businesses, which have been mired in a structural downturn. Sales, which exceeded 3 trillion won in 2018, dropped to 2.2122 trillion won last year, and the company has been recording operating losses since 2022. Operating losses for the first three quarters of this year alone amounted to 289.1 billion won. In addition, restructuring costs such as dismantling idle facilities and reallocating personnel have also been significant.

The company is accelerating its shift toward a new business-centered portfolio for survival. The review of new businesses, which concluded last year, has materialized this year with the acquisition of the Namdaemun Marriott Hotel and Aekyung Industrial, and Taekwang Industrial plans to further expand into cosmetics, energy, real estate, and shipbuilding. In July, the company announced an investment plan worth 1.5 trillion won. Of this, 318.6 billion won was to be raised through EB issuance, but the funding plan is now expected to be partially revised.

Nevertheless, the company intends to proceed with its mid- to long-term investment plans as scheduled. Taekwang Industrial continues to explore business expansion, including recent reviews of acquiring Aekyung Industrial and the Courtyard Marriott Hotel, and is also making new investments in real estate and shipbuilding. The company stated, "We are reviewing various options, including external borrowing, to secure operating and investment funds," adding, "We will further strengthen communication with stakeholders and do our utmost to restore market trust."

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