This article was published on April 4, 2025, at 3:58 p.m. on the ChosunBiz MoneyMove site.
Korea Zinc will issue corporate bonds and commercial papers (CP) to reduce the burden of rapidly increasing borrowing fund during the management rights dispute with Young Poong and MBK Partners. Typically, companies involved in management rights disputes find it challenging to issue new shares or corporate bonds. However, a considerable number of institutional investors showed interest in Korea Zinc's corporate bonds. This indicates that capital market participants seem to believe that Korea Zinc's management rights dispute has come to a conclusion.
According to the investment banking (IB) industry on the 4th, Korea Zinc received buy orders totaling 1.16 trillion won for a募集 of 4000억원 in its corporate bond demand forecast on the 3rd. For the two-year bond (2000억원), it received 6550억원, and for the three-year bond (2000억원), it received 5050억원. Korea Zinc met the target amounts with rates of 17 basis points (bps) for the two-year bond and 21 bps for the three-year bond based on the average rate (market rate) from private bond rating companies with an AA+ rating. The bond issuance date is set for the 11th.
Notably, Korea Zinc presented a broader desired interest rate band compared to other companies with the same credit rating. Korea Zinc proposed rates ranging from -50 to +50 bps. Compared to corporations such as POSCO and SK that issued corporate bonds this year, it has lowered the lower end by 2 bps while raising the upper end by 2 bps. This adjustment seems aimed at increasing the participation rate of institutional investors by providing relatively generous conditions.
The market had raised concerns about unsold bonds just before the demand forecast, but institutional investors seem to have concluded that the management rights dispute has been resolved. Chairman Choi Yoon-beom successfully defended his management rights by maintaining a majority on the board during the regular shareholders' meeting held on March 28. By restricting a portion of Young Poong and MBK's voting rights (25.4%) through cross-shareholdings, he led the shareholders' meeting from a favorable position. All proposed agenda items by Korea Zinc, including a cap on the number of directors at 19 and the appointment of eight new directors, passed.
Another noteworthy point is that Mirae Asset, KB, and Hana Securities are the lead underwriters for this corporate bond issuance. Coincidentally, the three securities firms, which actively supported Korea Zinc during its share competition with Young Poong and MBK, were chosen. Mirae Asset Securities and KB Securities acted as Korea Zinc's broker for the public purchase of its own stocks and as the lead underwriters for the paid-in capital increase. During the paid-in capital increase, Mirae Asset Securities was the lead underwriter, while KB Securities played a co-underwriting role. Hana Securities was responsible for public purchasing on behalf of Young Poong Precision Corporation.
Mirae Asset Securities incurred some 'injuries' while supporting Chairman Choi. After the public purchase of its own stocks, Korea Zinc planned a large-scale paid-in capital increase, and there were suspicions that Mirae Asset Securities, which was selected as the lead underwriter, omitted the paid-in capital increase plan from the public purchase application, even though they were aware of it during the public purchase period. The Financial Supervisory Service (FSS) also investigated Mirae Asset Securities for unfair trading allegations. (Related article☞Korea Zinc 'big deal' led to unexpected issues for Mirae Asset… what is the violation of market manipulation?)
On the 2nd, Korea Zinc also issued a 2000억원 six-month CP at an annual rate of 3.20%. This is a reduction of up to 0.4 percentage points compared to the CP interest rate issued six months ago in September of last year. The recent decline in national treasury bond rates has contributed to the drop in short-term interest rates. However, since CP must be refinanced every six months, Korea Zinc appears to seek issuance of long-term corporate bonds as well.
With this funding, Korea Zinc is expected to put out the 'urgent fire' first. In October of last year, Korea Zinc conducted a public purchase of its own stocks worth approximately 1.8 trillion won, borrowing money from sources like Meritz Securities and Hana Bank during this process.
In particular, repayment of the 1 trillion won borrowing fund obtained at a high interest rate of 6.5% from Meritz Securities is urgent. Considering that the average market rate for companies with the same credit rating as Korea Zinc was at the 3.2% level, this means they paid interest at nearly double that rate. Domestic credit rating agencies collectively lowered their outlook to 'negative.' Since the public offering of corporate bonds, which had not occurred in 15 years, was successful, Korea Zinc is expected to reduce its debt by up to 7000억원.
Korea Zinc's financial condition has deteriorated due to the management rights dispute with Young Poong and MBK, which has lasted for over six months. Interest expenses increased by 179%, from 42.3 billion won in 2023 to 117.9 billion won in just one year. During the same period, the interest coverage ratio, indicating the proportion of interest expenses to operating profit, fell from 15.6 times to 6.1 times. Korea Zinc recorded a net loss of 245.7 billion won in the fourth quarter of 2024, its first since its establishment.
An industry insider noted, 'While the corporate bond issuance was successful, the debt ratio is still high,' adding, 'Given that legal disputes are expected to continue, Korea Zinc needs to carry out internal adjustments while dealing with the aftermath of the MBK issue.'