Asiana Airlines have received from investors requests for early redemption of convertible bonds worth 10 billion won. The investors decided to exit early, even though the ailing airline is in talks with HDC Hyundai Industrial Development for its sale.
The investors who made early redemption requests are Q Capital Partners, a medium-sized private equity fund (PEF) management company, and NH Investment & Securities. They exercised put options (early redemption rights) on Asiana Airlines' 87th convertible bonds on May 14. Asiana Airlines issued CBs worth 100 billion won in April 2018, with CAPE Investment & Securities investing 50 billion won, Q Capital and NH Investment & Securities PE jointly investing 40 billion won, and A1 Asset Management 10 billion won.
These investors made high profits by converting most of their CBs into stocks and selling them in the market shortly after Kumho Group officially announced a plan to sell Asiana Airlines in April of 2019. The conversion price of a common stock was 5,000 won, but Asiana Airlines' stock price soared to 9,000 won immediately after the sale announcement. At the time, Q Capital and NH Investment & Securities also converted CBs worth 20 billion won into stocks and then sold them in the market to realize high profit margins. Shortly after HDC Hyundai Development was selected as a preferred bidder for the takeover of Asiana Airlines, Q Capital converted CBs worth 10 billion won to stocks in December 2019.
Q Capital apparently intended to make a decision on the remaining 10 billion won worth of CBs depending on progress in the sale of Asiana Airlines. Asiana Airlines seemed to meet its new owner, but the new coronavirus crisis has compelled HDC Hyundai Development to postpone the acquisition of the troubled airline indefinitely. This probably led Q Capital to request early redemption.
Another factor may be a recent drop in Asiana Airlines' share price. Since the outbreak of the pandemic, the company’s stock price has hovered between 2,000 won and 3,000 won. If the investors exercise their conversion rights, they will lose 20 percent of their investment.
The put options became exercisable on April 13. After mulling for a month, the investors decided to request early redemption.
Asiana Airlines said it will redeem the bonds on July 13.