H&Holdings, the parent of semiconductor equipment supplier H&Iruja, has redeemed hybrid debt prior to maturity as its financial position improves thanks to the release of a range of new smartphone models.
KB Asset Management, Shinhan BNP Paribas Asset Management, Gravity Private Equity and a consortium of SKS Private Equity and Shinyoung Securities Private Equity have recently exited their 100 billion won ($91.2 million) investment in H&Holdings following the company’s request to redeem the debt early.
The four investors together purchased exchangeable bonds worth 90 billion won issued by H&Holdings in September 2019 and an additional 10 billion won of exchangeable bonds in January 2020.
The hybrid notes, originally due to mature in 2023, gave investors the right to convert the debt into shares in subsidiary H&Iruja, at 27,292 won apiece. The notes had a 4% coupon rate and guaranteed the investors a 17% yield if held to maturity.
H&Holdings raised the financing as its position deteriorated in 2019. Consolidated revenue sharply decreased from 201.2 billion won in 2017 to 114.6 billion won in 2019, with operating income also declining from 31.1 billion won to 5.9 billion won.
However, the company has seen a strong rebound in earnings during the past year due to increased orders placed with H&Iruja, as Samsung Electronics, one of the company’s main customers, rolled out several new smartphone models, including foldable phones. H&Iruja specializes in building equipment for manufacturing organic light-emitting diode screens used in smartphones and televisions.
H&Holdings’ revenues are believed to have increased three-fold in 2019 over the previous year, and the company decided to use the improved cashflows to make early repayments and reduce its debt-servicing burden. The exit delivered a double-digit internal rate of return for the investors. (Reporting by Hee-yeon Han)