iM Securities on the 1st said it welcomes the funding purpose behind the exchangeable bonds (EB) issued by HD Korea Shipbuilding & Offshore Engineering against shares of HD Hyundai Heavy Industries, but found the method and timing somewhat disappointing.
Earlier, on the 31st, HD Korea Shipbuilding & Offshore Engineering, the intermediate holding company of HD Hyundai Heavy Industries, disclosed an EB issuance of $2 billion (about 3 trillion won) backed by HD Hyundai Heavy Industries shares as the underlying asset. An EB is a bond that grants the right to exchange the bond for shares such as stock in another company held by the issuer at a future date.
The number of shares subject to exchange is 5,613,704, equal to a 5.35% equity stake. The exchange price will be set in a range of 112.5% to 117.5% of the previous day's closing price. The exchangeable bonds will be listed on the Singapore Exchange, and the exchange right can be exercised starting June 14.
The proceeds will be used equally for working capital and investments in other entities, with 1.5 trillion won each. HD Korea Shipbuilding & Offshore Engineering plans to use the funds to expand its eco-friendly ship business, increase production facilities at overseas shipyards, develop next-generation energy businesses such as small modular reactors (SMR), Hydrogen Fuel Cell, and offshore wind, and pursue the U.S.-Korea shipbuilding cooperation project "MASGA."
Byun Yong-jin, an iM Securities analyst, said, "This event is meaningful in that the company has secured funding for overseas shipyard investments it has long discussed, suggesting this could be a year of full-fledged expansion," but added, "It is disappointing that the company chose to issue EBs, which can pressure the share price, even though funding was not urgent."
In particular, considering the financial conditions of HD Korea Shipbuilding & Offshore Engineering and HD Hyundai Heavy Industries, the analysis is that other funding methods beyond EBs were fully feasible. He explained, "Despite a financial position that would allow the company to rely on cash on hand, bank loans, or straight bond issuance without significant strain, it opted for EBs that burden the share price, leaving the impression it sought to save on financing expense."
As of the end of 2025, the debt-to-equity ratios of HD Korea Shipbuilding & Offshore Engineering and HD Hyundai Heavy Industries are 9.8% and 180.1%, respectively, both below the common threshold of 200%. Net debt also stands at 1.7788 trillion won and 2.927 trillion won, respectively, leading to an assessment that financial stability is sound.
Also weighing on investors is that HD Korea Shipbuilding & Offshore Engineering has repeatedly tapped equity-linked funding recently. Byun said, "Given its past record, the possibility that block deals, CBs, and EBs—rather than market financing—could again be mobilized to raise investment funds may act as a burden on investors."
In fact, the company raised about 600 billion won by issuing EBs amounting to 1.95% of total shares in 2025, and secured 350 billion won through a block deal equivalent to 3% of total shares in 2024.
Still, the outlook is that there is sufficient momentum for a share price rise ahead. Byun said, "First-quarter results are expected to be the best ever thanks to continued product mix (PMIX) improvement and the strong dollar," adding, "As the year progresses, increases in LNG carrier and tanker orders, the full-scale start of overseas investments, and progress on the MASGA project will help shipbuilding stocks regain momentum."