Market participants are paying close attention to Q Capital Partners and the private equity unit of NH Investment & Securities (NH PE)’ investment in convertible bonds issued by Asiana Airlines.

NH PE and Q Capital Partners are expected to cash out approximately 75 percent of its investment in Asiana Airlines’ convertible bonds, according to sources on May 20. The two firms jointly took over 40 billion won ($32.5 million) worth of convertible bonds in April 2018 via a 200 billion-won blind-pool fund NH-QCP SME Global Investment Partnership PEF.

NH PE and Q Capital Partners changed convertible bonds worth 20 billion won into stocks in April 2019 and additional convertible bonds worth 10 billion won in December. The firms have reportedly generated an internal rate of return of about 30 percent by selling stocks through open market transactions. This was shortly after Asiana Airlines’ share price soared to 9000 won due to the announcement of the airline’s sale.

NH PE and Q Capital Partners recently decided to request an early redemption of convertible bonds worth 10 billion won. This was due to the sluggish progress in HDC Hyundai Industrial Development’s acquisition of the airline and unfavorable market conditions due to the Covid-19 outbreak.

By exercising put options on 10 billion won worth of convertible bonds, the two firms will be able to pocket an extra 5 percent interest income. The yield to maturity on the 10 billion worth convertible bonds is 5 percent.

Previously, financially troubled Asiana Airlines issued convertible bonds worth 100 billion won in 2018. (Reporting by Hye-ran Kim)

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