This article was published on March 11, 2025, at 4:24 p.m. on the ChosunBiz MoneyMove website.
KB Securities has taken the lead in the refinancing of equity held by Macquarie Asset Management's Private Equity division for LG CNS, but is facing difficulties with the sell-down. Analysts attribute this to the decline in LG CNS's stock price since its listing and the lack of attractive interest rates.
According to investment banking (IB) industry sources on the 11th, KB Securities is conducting a refinancing sell-down of 1.1 trillion won for Macquarie Private Equity's equity in LG CNS. The total procurement amount is 1.28 trillion won, and the interest rate is reported to be around 5%. KB Securities plans to complete the transaction by the end of this month and proceed with the transfer of shares.
Macquarie Private Equity holds 21.5% of LG CNS's equity through a special purpose corporation (SPC) called Crystal Korea. Crystal Korea is securing 1.28 trillion won from KB Securities for refinancing, while any remaining funds are returned to Macquarie Private Equity. From Macquarie Private Equity's perspective, this is a way to reduce interest burdens and aim for early recovery. It is akin to an individual investor recovering collateralized stocks first through a stock collateral loan.
The lead arranger for the refinancing, KB Securities, needs to distribute the procurement burden, but the situation is challenging. LG CNS's stock price has continued to fall since its listing, and the interest rates are relatively not high. The stock is trading around 50,000 won, which is about 20% lower than the offering price of 61,900 won. The decline in collateral stock value is inevitable pressure on the main investors.
A source in the IB industry noted, "If investors participate in this transaction at the current price and the stock drops another 20%, they could face a loss of entitlement to benefits (EOD)." They added, "Even with such risks, if the interest rate is at 5%, the attractiveness of the deal, regardless of being acquisition finance, is bound to diminish."
Securities firms are also maintaining a cautious stance regarding LG CNS's stock price outlook. Although it has only been two months since its listing, no analytical reports have been released. Oh Dong-hwan, a researcher at Samsung Securities, explained in a report published before the listing, "The slowdown of the secondary battery business, which drove high revenue growth for three years, has also dampened LG CNS's revenue growth rate," adding, "Improving labor cost efficiency and operational effectiveness is necessary for an increase in corporate value."
Macquarie Private Equity acquired 35% of LG CNS's equity in April 2020, utilizing acquisition finance of 620 billion won. As LG CNS's corporate value increased, it raised another 1.17 trillion won in June 2022 for interest burden relief and investment returns. As of this date, LG CNS's market capitalization stands at 4.93 trillion won. The protective escrow on the remaining equity will be released in August.