On the 16th, Quad Asset Management argued that Korea Real Estate Investment & Trust Co. (KOREIT)'s recent plan to issue 20 billion won in exchangeable bonds (EB) "could damage shareholder value."
Quad Asset Management said it sent a shareholder letter to the board that day, questioning KOREIT's disclosure on the EB issuance. Quad Asset Management holds 3% equity in KOREIT.
Quad Asset Management noted, "This decision by KOREIT raises suspicion that it is being issued to avoid the passage of the Commercial Act amendment that centers on mandating the retirement of treasury shares," adding, "There are concerns that it runs counter to the policy direction of the government and the National Assembly."
Regarding KOREIT's disclosure that "EB issuance does not involve a new share issue, so shareholder equity dilution will be limited," Quad Asset Management countered, "Because treasury shares will be released into the market, dilution will occur."
It also asked the board, "Please answer whether there was any discussion to prevent the immediate dilution of 5.89%—the share ratio subject to exchange—through the EB issuance and the resulting damage to shareholder value."
It further pointed out, "Although there is currently 108 billion won in cash and cash equivalents, explain why most of it will be used to repay public offering bonds instead of first using it for the paid-in capital increase funds for Koreit Asset Management."
Quad Asset Management said that since KOREIT holds 5.31% equity in IGIS Asset Management, about 58.4 billion won would flow in if IGIS Asset Management is sold, so there would be no difficulty paying in the funds for the capital increase.
In addition, it asked about: ▲ the reasons for determining that the EB issuance would have little impact on shareholder interests ▲ why the projected inflow amount for this year was not included, even though the planned amount of fund usage was disclosed.
Earlier, on the 15th, KOREIT said it would issue 20 billion won in bearer, coupon, unsecured private placement exchangeable bonds (EB). The exchange target is 14,889,052 treasury shares held by KOREIT. KOREIT is carrying out this EB issuance to participate in a paid-in capital increase for its subsidiary Koreit Asset Management, which has fallen into a state of complete capital impairment.