JEJU-DO < invest Korea

According to Pulse by Maeil Business News Korea,

AK Holdings Inc., the holding company of South Korea’s Aekyung Group and parent to Jeju Air Co., is arranging a fundraising of up to 100 billion won ($75.4 million) to bolster ammunitions for the country’s largest budget carrier to enhance its long-haul fleet.

According to multiple sources from the investment bank industry on Thursday, AK Holdings is proceeding to offer up to 100 billion won in bonds exchangeable to Jeju Air common shares. The bonds will be designed to carry a coupon rate of zero percent and maturity yield of 3 percent. Investors can covert the bonds into Jeju shares within three months and have the option to redeem their investment in two years.

About 10 local asset managers and private equity funds are potential candidates in the offering arranged by Daishin Securities and Meritz Securities. The deal will be completed early next month.

An exchangeable bond is a bond that provides investors the rights to exchange to a stock designated by the issuer. It is categorized as a mezzanine along with convertible bonds, bonds with warrant, and redeemable convertible preferred stock. An exchangeable bond falls under the capital account category in the books and therefore is not counted as debt. Companies hoping to raise funds and improve financial structure prefer such bond issues.

AK Holdings plans to spend the proceeds for its subsidiary Jeju Air. It plans to boost capital strength of the carrier through capital increase via shareholder offering. Jeju Air plans to bring in next-generation aircraft (Boeing 737-8) with hopes to widen the gap with other low-cost carriers.

Jeju Air hopes to buy 40 new aircrafts from Boeing starting next year. Jeju Air managed to narrow losses from the previous quarter and year in the second quarter with an operating loss of 55 billion won on renewal of international flights.

“AK Holdings, the issuer, has stable cash flow, and investors can bet on further rise in Jeju Air stock,” said an unnamed official from the investment bank industry. “Many institutions are said to have strong interest in the bonds.”

Share of Jeju Air were trading 3.63 percent lower at 15,950 won on Friday morning and AK Holdings 0.6 percent lower at 16,500 won.

By Kang Woo-seok and Lee Eun-joo

Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.

Source: Pulse by Maeil Business News Korea (Aug. 19, 2022)