This article was published on Dec. 27, 2024, at 2:55 p.m. on the CHOSUNBIZ Money Move (MM) site.
Ecopro, the holding company of Ecopro Group, has issued an exchange bond (EB) worth 30 billion won. The gap between the exchange price and the current stock price has narrowed compared to previously issued EBs, and the interest rate has also increased. Analysts note that Ecopro, which had maintained a high stance in the investment attraction process, accepted somewhat unfavorable investment conditions due to poor business conditions.
According to the investment banking (IB) industry on the 28th, Ecopro resolved in a board meeting on the 26th to issue the 25th series of bearer convertible exchange bonds (EB) to BNW Investment, a domestic private equity fund (PEF) operator. The exchange target is 409,836 shares of treasury stock held by Ecopro, with an exchange price of 73,200 won.
Ecopro issued EBs to repay 46 billion won borrowed from Shinhan Bank in April. The nominal interest rate is 0% upon issuance and will increase to 5.0% after two years. Subsequently, it will add 1 percentage point each year. The guaranteed yield is 2% per annum. After two years, it will increase to 7% per annum and add 1 percentage point each year.
Notably, the conditions for the EBs issued by Ecopro are becoming increasingly favorable to investors. In October, the exchange price for the EB issued was 92,200 won. The gap between the exchange price and the benchmark time of Ecopro’s stock price is narrowing. This signifies that investor expectations regarding the rise in Ecopro’s stock price have diminished.
Analysts suggest that this trend is due to the continued poor performance of Ecopro Group. As the growth slowdown in the electric vehicle market is extending longer than expected, Ecopro Group's stock price continues to decline. The poor performance of EcoproBM, a subsidiary that manufactures secondary battery anode materials and accounts for 93% of Ecopro's performance, is particularly painful.
The higher the exchange price, the more stringent the conditions for exercising the exchange rights, which benefits the issuing company and disadvantages investors. Investors can exchange these bonds for treasury stock held by Ecopro starting Jan. 31, but the stock price must be higher than the exchange price for them to be profitable.
An IB industry insider noted, “In the past, secondary battery-related companies maintained a strong stance even with a need for funding, but as cash has become urgent, it is becoming difficult for issuers to secure favorable conditions as before. The exchange price is determined through formulas, but it is essentially set based on the agreed price between issuers and investors.”
In the securities industry, forecasts suggest EcoproBM will incur a net loss of 63.3 billion won this year. Ecopro recorded sales of 2.479 trillion won up to the third quarter but suffered a net loss of 209.6 billion won. EcoproBM also reported a loss of 125.4 billion won up to the third quarter.
Kwon Jun-soo, a researcher at Kiwoom Securities, explained, “EcoproBM will also record an operating loss of 22.2 billion won in the fourth quarter,” adding, “Due to the slowdown in electric vehicle demand, the operation of the eighth anode material factory and the expansion of the ninth factory have been postponed.” He further remarked, “Ultimately, performance will improve only when electric vehicle demand in Europe recovers.”
In response, a representative from Ecopro stated, “The exchange price is determined according to a formula linked to the stock price, and it has only decreased due to stock price fluctuations.” The Ecopro stock price, which was 80,400 won on Oct. 21, had fallen to the 57,000 won range by the 27th.