HD Korea Shipbuilding & Offshore Engineering (KSOE) is moving to issue up to $2 billion, or approximately 3 trillion won, in exchangeable bonds backed by its stake in its subsidiary HD Hyundai Heavy Industries. The company plans to use the proceeds to fund the Korea-U.S. shipbuilding cooperation MASGA project and to expand overseas production facilities.

HD KSOE said in a regulatory filing on March 31 that its board of directors approved a plan to issue exchangeable bonds with 5,613,704 shares of HD Hyundai Heavy Industries as the underlying asset, representing 5.35 percent of the company’s total outstanding shares.

Exchangeable bonds are bonds that grant the right to be exchanged for shares held by the issuing company, including those of itself or its subsidiaries. For the issuer, they enable liquidity to be secured at relatively low interest costs, while investors can generate capital gains if the share price at maturity exceeds the exchange price.

The exchange price will be set at a premium of 12.5 percent to 17.5 percent over the closing price on the day. The interest rate will be capped at 1 percent, with a maturity of five years.

“The actual size of the issuance and specific terms may change depending on the results of the demand forecast,” an HD KSOE official said.

The funds raised will be used to expand the eco-friendly ship business, increase production capacity at overseas yards, invest in next-generation energy sources such as small modular reactors, hydrogen fuel cells and offshore wind power, and advance the MASGA project.

Following the issuance, HD KSOE’s stake in HD Hyundai Heavy Industries will decline from 69.2 percent to 63.85 percent.
Source: Business Korea