South Korean private equity (PE) firms SG PE and Korea Investment PE (KI PE) have invested 40 billion won ($35 million) in domestic auto parts maker Shin Young.
They acquired redeemable convertible preference shares issued by Shin Young through a joint fund, betting on the company’s stable revenue structure and growth potential in overseas markets, industry sources said on Friday (February 26).
SG PE and KI PE were awarded a corporate restructuring fund mandate by Korea Growth Investment Corp (K-Growth) in July 2020 and the fund had its initial closing at 235.5 billion won after six months of fundraising and a final closing at 255.5 billion won. This was the largest amount for any corporate restructuring fund.
The two PE firms decided to make their first investment just two months after the creation of the fund, whose purpose is to help attract private capital to South Korea’s restructuring market.
Founded in 1973, Shin Young supplies parts to Hyundai Motor and Kia Motors, producing its main products using a hot stamping method. The company has its own roll forming and tapping plates technology.
Shin Young has had a stable performance, recording revenue of 528.8 billion won and operating income of 22.1 billion won in 2019. At the time its revenue had increased by 13.6% and operating income had risen from 15.6 billion won since 2015.
However, the firm’s financial status has temporarily deteriorated due to the decision to enter the U.S. market by building the Car Tech production plant in Alabama. It has been required to make continued investment in the U.S. subsidiary.
In 2019 the company had short-term borrowings of 196.6 billion won, current maturities on long-term debt of 44.6 billion won and long-term borrowings of 76.3 billion won. It repaid 32 billion won to Keystone PE and Songhyun Investment in 2020.
Shin Young plans to use proceeds from the shares issue to improve its financial structure and boost its growth by expanding the domestic and U.S. businesses. SG PE and KI PE will exit the company through an initial public offering.
Myoung Shin Industry set a precedent by making a successful stock market debut at the end of last year thanks to its hot stamping technology. (Reporting by Se-hun Jo)