This article was published on Feb. 5, 2025, at 5:39 p.m. on the ChosunBiz MoneyMove site.
The holding company of Daemyung Sono Group, Sono International, has successfully raised 500 billion won in pre-initial public offering (IPO) investments. The company decided to issue exchange bonds and electronic short-term bonds to two securities firms. Sono International plans to begin the IPO as early as the second half of this year, with the intention of issuing new shares to fully repay the 500 billion won.
According to the investment banking (IB) industry on the 5th, Sono International has decided to receive up to 300 billion won from Woori Investment & Securities as EB and up to 200 billion won from DB Financial Investment as electronic short-term bonds (ABSTB). The two securities firms will finalize the execution decision at the investment review committee this month.
This investment is being carried out in a pre-IPO nature. After issuing EB and selling them to securities firms, if the public offering price during the upcoming IPO is lower than the exchange price, repayment will be made, and in the opposite case, they will be exchanged for treasury stocks. If an investor exchanges EB for treasury stocks, it can create an indirect capital increase effect for Sono International, as treasury stocks are not included in capital until they are sold to investors.
Electronic short-term bonds are securities issued by corporations to raise short-term funds with maturities of less than one year. They are issued electronically rather than on paper and have a shorter maturity than asset-backed commercial papers (ABCP).
This investment attraction by Sono International has a bridge loan nature. First, it will borrow money from securities firms to enhance capital, and then plan to repay it with funds obtained through issuing new shares at the time of listing.
There are no suitable comparable companies among domestic listed companies, but MONA YONGPYONG is a somewhat similar company. In this case, the price-to-book ratio (PBR) is only about 0.4 to 0.5 times, leading to a calculation that the corporate value would be less than 300 billion won if simply applied to Sono International. Even when selecting Ananti (PBR 0.8 times) as a comparable company, the estimated market capitalization remains in the range of 400 billion won.
However, Sono International is reported to be preparing to list with a corporate value in the trillions won. Analysis suggests it could be recognized with a corporate value of around 4 trillion won, excluding the airline business. If the corporate value is 4 trillion won, it seems feasible to raise 500 billion won through issuing new shares. In fact, it is reported that Sono International is confident that more than 500 billion won will flow in through the IPO.
An IB industry official noted, "Considering the equity value of the airlines owned by the group, it is possible to be recognized with a corporate value higher than that."
If Sono International secures management rights of one of the two airlines (T'way Air, Air Premia) before fully embarking on its IPO preparations, its corporate value could increase further. Daemyung Sono is currently the second-largest shareholder, holding a 26.77% stake in T'way Air, and will engage in a proxy battle against the largest shareholder YeaRimDang and Tway Holdings (30.06%) at the regular shareholders' meeting in March. Sono International and Daemyung Sonoseason hold 16.77% and 10%, respectively.
While there are speculations that Sono International will use the funds raised for airline acquisitions, the company maintains its stance that "it is not the case." They state that the necessary funds for acquiring stakes in Air Premia have already been secured. According to the company's official stance, the funds being raised will be used for construction material costs and labor costs for the Sol Beach Namhae Resort opening in July and the remodeling of the Gyeongju Resort, which is undergoing renovations at the cost of 150 billion won.