This article was displayed on the ChosunBiz MoneyMove (MM) site at 5:52 p.m. on Feb. 2, 2026.
A 10 billion won new funding by battery materials company Enchem has effectively devolved into a backroom deal. In addition to a substitute payment for a convertible bond (CB) with no cash inflow, the company even resorted to the unusual step for a listed firm of issuing physical notes. There are doubts that normal financing has become difficult amid worsening results.
According to investment banking (IB) sources and the Financial Supervisory Service's electronic disclosure system on the 2nd, Enchem late last month cut the size of its 16th bearer, unsecured private CB issuance to 7.5 billion won from the initially planned 10.5 billion won. The structure called for Secondary Battery Asset Management to underwrite the entire amount, while the remaining 3 billion won, split as the 17th tranche, was issued entirely through a "substitute payment (setoff)" method.
A substitute payment replaces lending with a CB issuance—a "book transaction" that brings not a single won of cash into the company's coffers. Secondary Battery Asset Management initially sought on the 20th of last month to underwrite the entire 10.5 billion won Enchem CB, but two days later on the 22nd shifted 3 billion won to a bond setoff.
Another notable point is that Enchem issued the entire 7.5 billion won CB as physical bond certificates. Since the introduction of the electronic securities system in 2019, the standard has been electronic registration, under which issuance and holdings of securities, including CBs and other bonds, are managed on computer systems. But Enchem printed physical certificates—seven notes of 1 billion won and five notes of 100 million won—for Secondary Battery Asset Management.
Analysts say Enchem lowered the transparency of its new financing on its own. The fact that the underwriter, Secondary Battery Asset Management, is a paper company established in December last year with paid-in capital of 1 million won adds to the doubts. Barely a month after its founding, it walked away with 10 billion won worth of CBs in physical certificates, including substitute payment.
A securities industry official said, "There is a strong possibility of classic zero-capital financing, in which an underwriter without capital raises money in the private loan market, using the physical CBs as collateral (pledge) to meet the payment," adding, "In that case, a risky structure forms in which a specific group rolls over funds by leveraging the listed company's credit."
There is also an assessment that Enchem has hit the limits of normal financing. The company initially met with major domestic institutional investors in the second half of last year to pursue up to 100 billion won in new funding, but it not only slashed the size to one-tenth, it also issued physical CBs whose distribution paths are hard to trace.
In fact, major domestic institutional investors are said to have uniformly shunned Enchem's CBs. The continued electric vehicle "chasm" (stagnant demand) and worsening results became headwinds. Enchem's consolidation sales fell from 509.8 billion won in 2022 to 365.7 billion won in 2024, and starting in 2024, operating profit also turned to a loss.
On top of that, the massive volume of CBs already outstanding and awaiting conversion is further prompting institutions to steer clear. As the share price, which once topped 360,000 won per share, fell into the 80,000 won range, investors exercised put options (early redemption rights) one after another, but the tally still shows nearly 280 billion won of unredeemed CBs remaining.
The company said, "In the process of splitting the CB initially planned at 10.5 billion won into the 16th and 17th tranches and issuing the 17th CB of 3 billion won as a substitute payment, electronic securities issuance was not possible, so physical bond certificates were issued," adding, "For the 16th CB as well, the underwriter requested physical issuance, so we proceeded in the same way."
But the capital market's view is cold. A securities industry official said, "Regardless of whether the payment method is cash or substitute payment, there are no legal or technical hurdles to electronic registration issuance as long as the supporting documents are in place," adding, "It appears intended either to avoid registration review or to use the issued CBs as collateral to raise funds (pledge)."