The main creditors of South Korean steelmaker Dongbu Steel have agreed on 360 billion won ($305.4 million) investment from a KG Group-led consortium, preceded by a share capital reduction and debt-to-equity swap.
According to a disclosure on June 5, the bondholders of Dongbu Steel agreed to issue new shares worth 5,000 won apiece at face value and sell it to new investors including KG Steel and Cactus Private Equity.
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KG-led consortium’s acquisition of some 72 percent stake will end to the loan workout scheme of creditors, Dongbu Steel said in a disclosure.
The creditors include Korea Development Bank, NongHyup Bank, Export-Import Bank of Korea, KEB Hana Bank and Shinhan Bank.
The chemical-to-financial conglomerate KG was selected as the preferred bidder in April to acquire a majority stake in Dongbu Steel.
Prior to the third-party allocation of shares, lenders to the debt-saddled steelmaker will exercise a capital reduction through an 8.5:1 reverse stock split in terms of common shares they own. Other common shares and preferred shares will be canceled involving a 3:1 reverse stock split.
This will shrink creditors’ combined Dongbu Steel ownership from some 85 percent as of end-March to less than 30 percent.
The stock cancellation will come alongside a 605 billion won debt-to-equity swap, under which creditors will spend fivefold of the face value of the stake.
For the remaining debt, the loan repayment is due by end-2025.
This comes after Dongbu Steel creditors’ failed sell-off attempts, with Pohang-based Posco in 2014 and Iranian firm South Kabeh Steel in 2017.
By Son Ji-hyoung (email@example.com)