NUON (formerly Hanil Vacuum) has seen its share price fall about 35% from the start of the year, triggering warnings over convertible bond (CB) refixing (Refixing, an adjustment of the conversion price due to a drop in the market price). On top of that, the early redemption right (put option) exercise window is approaching, adding to funding pressures.
According to the Financial Supervisory Service on the 23rd, the conversion prices for the 14th and 15th CBs issued by NUON, which manufactures vacuum deposition equipment for coating phone cases and lenses, dropped from 1,171 won in September to 1,135 won in October. The conversion price, which was around 1,325 won in July, has been adjusted for three consecutive months.
NUON's CB refixing has occurred every month since the first adjustment on Feb. 17, one month after issuance. Even though most CBs review refixing eligibility on a monthly basis, it is rare for the price to actually be adjusted every month.
The conversion price, which was 1,560 won at issuance, fell to 1,215 won in February and dropped to 1,092 won in April, reaching the refixing floor price. It then recovered slightly to 1,108 won in June, but given the recent share price trend, downward pressure has grown again.
The refixing system is a CB investor protection mechanism that lowers the conversion price in line with a drop in the issuer's share price. However, NUON's CBs also include a condition to raise the conversion price when the market price rises, making refixing more frequent than with typical CBs.
The problem is that the current conversion price (1,135 won) is only 40 won away from the floor price (1,092 won). If the share price falls below this level, investors are likely to choose principal redemption instead of converting to shares.
In particular, for NUON, the first put option exercise period for the two CBs (totaling 7 billion won) is about a month away, from Nov. 16 to Dec. 16.
Kim Beom-jun, a professor in the Department of Accounting at Catholic University, said, "If the share price falls further when the conversion price is close to the floor price, investors are likely to exercise their put options."
However, NUON's cash position is severely lacking. As of the first half of this year, current assets were 24.3 billion won and current liabilities were 42.3 billion won, with liabilities about 18 billion won higher than assets. Of this, cash and cash equivalents were 1.9 billion won, and including 9.2 billion won in trade receivables, liquid assets amounted to only about 11.1 billion won.
Operating losses have also continued for three consecutive years through the first half of this year. On a consolidation basis for 2024, revenue was 16.9 billion won and the operating loss was 11.6 billion won. In 2023, revenue was 4.3 billion won and the operating loss was 9.1 billion won; in 2022, revenue was 6 billion won and the operating loss was 6 billion won, bringing cumulative losses over the past three years to 26.7 billion won.
In the end, to prepare for put option exercises, analysts say there is no clear solution other than securing cash through refinancing issuance or asset sales. NUON holds 12 billion won in tangible assets and 65.8 billion won in intangible assets, but most of the intangible assets consist of goodwill and trademark rights of Organic K acquired last year, making short-term monetization difficult.
A NUON official said, "It has been only two years since the merger was completed, so this is still a period of capital investment," and added, "We will stabilize cash flow through performance improvement going forward."