Hanwha Solutions and DL Chemical's joint venture, Yeochun NCC, has a greater chance of escaping its debt default crisis, leading to a rebound in Yeochun NCC's corporate bond prices.
According to the Korea Exchange on the 11th, Yeochun NCC78 closed at 9,340.1 won that day. Although it dropped by 730.3 won compared to the previous trading day, it remained 2,220.1 won higher than the intraday low of 7,120 won. This corporate bond was issued by Yeochun NCC in March 2024 with a total amount of 150 billion won. The redemption date is March 2026.
Yeochun NCC84-1 and Yeochun NCC84-2 also closed at 8,999.8 won and 8,670 won, respectively. Although both corporate bonds saw a price drop of around 10% compared to the previous trading day, they rebounded by 1,989.8 won and 1,658.5 won from their intraday lows, respectively. These two corporate bonds were issued last October, with amounts of 70 billion won and 30 billion won, respectively. The maturity date for Yeochun NCC84-1 is October 2026, and for Yeochun NCC84-2, it is October 2027.
Yeochun NCC's corporate bonds have been traded around 10,000 won until now. This is because Yeochun NCC has been rated as a stable bond with a credit rating of A-. However, as Hanwha Solutions and DL Chemical showed differing views on inputting operating funds, concerns over default emerged, leading to a sharp decline in bond prices.
Following Hanwha Solutions, DL Chemical approved a capital increase of about 200 billion won that day, increasing the likelihood of financial support for Yeochun NCC, which helped reduce the bonds' price decline.
The issue is that it remains uncertain when and how much of the funds raised by DL Chemical in the capital increase will be injected into Yeochun NCC. Following the capital increase, DL Chemical stated in a press release, "Issuing stocks without any explanation or cause analysis does not help in normalizing Yeochun NCC at all."
Yeochun NCC had previously stated it would not have cash flow issues until the end of the year after receiving a total of 200 billion won from Hanwha Solutions and DL Chemical in March, but it has requested additional investment in just three months. DL noted, "At the time (in March), either the report was false, or it meant that management has been neglected to a serious extent, which is deceptive behavior towards shareholders and the market."
DL and Hanwha are also engaged in a war of blame. DL argues that Hanwha Group has undermined Yeochun NCC's competitiveness and self-sufficiency. DL claimed, "In our case, we traded ethylene at prices that enabled Yeochun NCC to secure price competitiveness and aimed to enhance its self-sustaining capability, whereas Hanwha insisted on prices that would only lead to losses for Yeochun NCC, thereby favoring its own conditions."
Hanwha rebutted that it is not true that the transaction prices for ethylene between Yeochun NCC and DL are the same. In fact, Hanwha explains that while its annual ethylene transaction volume with Yeochun NCC is 1 million tons, DL's is only 400,000 tons, and it is not even receiving discounts for bulk transactions. Hanwha has also demanded that the raw material contract with Yeochun NCC be set at market price levels to avoid potential violations of corporate tax laws and fair trade laws.
Hanwha stated, "We plan to enter into a contract with Yeochun NCC under objective and fair conditions based on market principles," adding, "In particular, Hanwha is firm in its intention to provide financial support to Yeochun NCC, and DL should promptly support Yeochun NCC to facilitate its normalization."