SK D&D corporate identity logo [Provided by SK D&D]
SK D&D corporate identity logo [Provided by SK D&D]

Private equity fund manager Han & Co. will participate in a rights offering by its portfolio company SK D&D, in what amounts to an emergency capital injection aimed at stepping back from an effective delisting and overcoming a liquidity crunch.

According to investment banking industry sources, SK D&D held a board meeting on June 28 and approved a rights offering totaling 136.7 billion won ($94.9 million). The planned issue price is 3,060 won per share, with SK D&D set to issue 44.68 million new common shares — equivalent to 2.4 times, or 240 percent, of its existing total shares outstanding. The final issue price will be confirmed in early October.

The entire 136.7 billion won raised will go toward debt repayment. SK D&D plans to use 62 billion won to retire privately placed bonds maturing in October, and approximately 74.7 billion won to fulfill joint-guarantee obligations on installment loans taken out by buyers at the Gunpo Triarts Knowledge Industry Center.

The rights offering reflects a sharp deterioration in the capital market environment surrounding SK D&D. A string of recent setbacks — including credit problems tied to JR Global Reit and JTBC securitization borrowings — has rapidly widened the company's credit risk. As financial institutions have tightened lending and bond underwriting standards for sub-investment-grade borrowers (BBB and below), SK D&D has struggled to raise funds through new borrowings or debt rollovers.

A slump in the commercial real estate market has weakened cash generation from SK D&D's core business, and the company appears to have concluded that its own available cash is insufficient to absorb the liquidity pressure. SK D&D recently disclosed a financial restructuring plan through a public filing, outlining steps to sell and monetize assets while simultaneously raising capital to bring down its debt ratio and borrowing dependency.

"This rights offering is essentially an emergency transfusion by the controlling shareholder to prevent a severe cash crunch and keep the company alive," an investment banking industry official said.

Market participants have also taken note of the offering's structure. Any unsubscribed shares left after the existing shareholder subscription period will be canceled rather than redistributed. Han & Co., as the largest shareholder, has said it intends to subscribe to its full allotment, though its final ownership stake will depend on how many other shareholders participate. While the prospect of Han & Co. increasing its stake had prompted speculation about a potential delisting, SK D&D stated in its securities registration filing that it has no plans to pursue a delisting or tender offer for now.

"Even in an urgent situation requiring an immediate cash injection, Han & Co.'s choice of a rights offering signals its determination to see the capital raise through," another industry official said.


an@heraldcorp.com