This article was displayed on the ChosunBiz MoneyMove (MM) site at 3:31 p.m. on Jul. 23, 2026.
KOSDAQ-listed ITM Semiconductor(084850) has moved to issue convertible bonds (CB) to refinance perpetual exchangeable bonds (EB) from Gori. It is part of a response strategy to shake off worsening business performance and financial weakness. ITM Semiconductor is expected to ease its high interest burden and speed up financial improvement through this CB issuance. However, the poor performance of its main production base, the Vietnam subsidiary, remains a burden.
According to investment banks (IB) and the Financial Supervisory Service's electronic disclosure system on the 23rd, ITM Semiconductor decided on the 22nd to issue the 6th CB worth 20 billion won. The company plans to use most of the funds raised to repay a borrowing fund taken out to redeem the 5th EB issued three years ago.
The CB issued this time by ITM Semiconductor carries a five-year maturity and a zero-coupon structure with both the coupon and maturity interest at 0%. The conversion price was set at 8,344 won, about 5% above the current share price. Funds managed by Rhinos Asset Management and Timefolio Asset Management were named as investors.
Of the 20 billion won raised through the CB issuance, ITM Semiconductor plans to invest 4 billion won in facility funds and use the remaining 16 billion won to repay debt. As the step-up date for the interest rate on the 5th EB issued three years ago came due, the proceeds will be used as refinancing funds to ease the interest burden.
The EB to be redeemed with this CB proceeds was issued in Jul. 2023 for a total of 21.5 billion won. To secure working capital, it was issued with a 0% coupon and 2.5% maturity interest, and it matures in 2053. However, starting on Jul. 21, the third year after issuance, a step-up to 7% per annum with annual compounding took effect, and a clause adds 1 percentage point to the interest rate every year thereafter.
For ITM Semiconductor, the burden from an interest rate in the 7% range is inevitably heavy. While the actual EB interest burden is only around 1.5 billion won a year, the company's cash and cash equivalents under consolidation were just about 21 billion won in the first quarter. Its financial capacity has deteriorated significantly, with an operating loss of 7 billion won.
ITM Semiconductor sought to issue a refinancing CB to reduce the interest burden, but as the schedule was delayed, it had to borrow repayment funds from an affiliate at a 4.5% interest rate to put out the immediate fire. In effect, it brought in external funds as a short-term bridge loan ahead of the CB issuance. By using this zero-coupon CB to repay the borrowing fund, it succeeded in refinancing interest in the 7% range to zero.
Although it has immediately succeeded in easing the interest burden, the industry says ITM Semiconductor's sluggish business performance still poses a risk. As profitability at the Vietnam subsidiary, which had been the main production base, has deteriorated, the burden has been passed on to the headquarters. ITM Vietnam, the Vietnam subsidiary of ITM Semiconductor, has posted losses for six consecutive years since 2020 through last year. Last year, reflecting losses from an embezzlement case and other factors, it even recorded an operating loss of 85.7 billion won.
ITM Semiconductor has continued to support the Vietnam subsidiary. The cumulative amount of debt guarantees is approaching 80 billion won, and considering funds provided through paid-in capital increases, the cumulative support exceeds 100 billion won.
The company is currently building plants in Indonesia and India and seeking expansion into e-cigarettes and defense and robotics. However, for overall improvement in results, profitability at the Vietnam subsidiary must improve. The Vietnam subsidiary suspended its low-margin battery protection circuit package supply contract with Apple in the name of improving profitability, but there are somewhat worried voices about whether new businesses can fill the sales gap.
A person in the capital market industry said, "With this CB issuance easing the interest burden, it seems the company could gain momentum in improving its finances," adding, "However, to escape losses, fundamental business viability at the Vietnam subsidiary must improve in tandem."