This article was published on Jan. 6, 2025, at 5:29 p.m. on the CHOSUNBIZ MoneyMove site.
Sonoh International, the holding company of Daemyung Sono Group, is in discussions with securities companies for financing characterized as pre-initial public offering (IPO) ahead of its listing. It is reported that the company is focusing on issuing exchangeable bonds (EB) using its treasury shares and on methods linked to equities.
According to the investment banking (IB) industry on the 6th, Sonoh International has been in talks with DB Financial Investment and a mid-sized securities firm within the top 20 to attract investments amounting to 300 billion won, and it has been confirmed that these securities companies are preparing for an investment review committee.
An industry contact for financial investments noted, "Sonoh International plans to go public as early as the second half of this year, but first, they are considering raising funds and then issuing new shares during the initial public offering (IPO) process to repay the raised funds."
As a holding company, Sonoh International is required to maintain between 200 billion and 300 billion won in cash regularly, but its recent purchase of equity in low-cost airlines (LLC) led to an investment of about 160 billion won, increasing the need for funding.
Sonoh International acquired equity in T'way Air twice last year. In July, it purchased a 14.9% stake directly from private equity fund (PEF) operator JKL Partners for 105.6 billion won, and in August, its affiliate Daemyung Sono Season acquired an additional 10% stake for 70.9 billion won. In November of the same year, Sonoh International also acquired equity in Air Premia, buying 11% of existing shares from JC Partners for 53.7 billion won, and it holds a call option for an additional 11% of shares. JC Partners also holds a put option on these shares, making acquisition almost certain.
The funding structure is said to be strongly leaning toward issuing treasury share-linked EBs, which has been pursued since the end of last year. Initially, the plan is to issue EBs and sell them to securities companies; if the public offering price during the IPO is lower than the exchange price, repayment will occur, otherwise, treasury shares will be exchanged. In this case, investors can hold the shares and sell them for a profit after the public offering price rises.
If investors exchange EBs for treasury shares, it can create an indirect capital increase effect for Sonoh International as treasury shares do not count as capital but change to capital once sold to investors.
As of the end of 2023, Sonoh International's treasury shares amounted to 827,157 shares, accounting for 35.9% of the total issued shares (2,302,212 shares). The company acquired these shares during the restructuring process from related parties such as Green Development Industry and Daemyung Leisure & Tourism. Due to the high proportion of treasury shares, it has been reported that issuing mezzanine financing using these shares is the most viable option.