South Korea’s Jin Air plans $157.5mn recapitalisation

Jin Air (LJ, Jeju) will strengthen its capital by an additional KRW183.4 billion won (USD157.5 million) by issuing both new shares and perpetual bonds in an effort to ride out the ongoing impact of the pandemic on travel demand.

The Korean Air (KE, Seoul Incheon) low-cost subsidiary revealed in a stock exchange filing on August 12 that its board had approved the offering of KRW108.4 billion (USD93.1 million) worth of new shares and KRW75 billion (USD64.4 million) in 30-year perpetual bonds, to put towards paying debts and bolstering its working capital.

The 7.2 million shares will initially be offered on November 1-2 at KRW15,050 (USD12.93) per share to its parent and to other shareholders and its employee union, after which they will be available to the public on November 4-5. The issue date has been set at November 9, raising the total to 52.2 million shares.

“This is to proactively manage the company’s financial soundness and secure liquidity in advance for the post-coronavirus era,” Jin Air said, adding that “the new capital will help improve our financial health.”

Korean Air owner Hanjin KAL confirmed in its own statement on August 13 that it would acquire an additional 3,296,041 shares in Jin Air, for KRW49.6 billion (USD42.6 million). That will raise its stake to 54.9%, it said. It put the expected date of acquisition of the stock at November 10.

The South Korean conglomerate explained that the purpose of the acquisition was “to maintain our corporate value and control over our major subsidiaries.”

The hybrid bonds, with a coupon rate set at 6.8%, will be issued through private placement on August 20.

As of the end of March, Jin Air’s liabilities exceeded working capital by 42.4%, local media reported. If this rises above 50%, the Korea Stock Exchange will place it on a watch list. A stock is typically shunned once it is on the list.