Hyundai Construction Equipment Co. and its sister Hyundai Electric & Energy Systems Co. (Hyundai Electric) are significantly increasing equity capital to raise funds to expand overseas and add facilities for new growth.
The two companies in separate disclosures on Tuesday said their board endorsed a plan to offer its existing shareholders rights for 1.38 million issues and 1.42 million issues, respectively increasing outstanding shares by around 38 percent to 4.96 million for Hyundai Construction Equipment and 5.13 million for Hyundai Electric.
At the same time, the companies will issue a bonus share per each right they exercise, a move that will also make them look bigger with an increased number of shares.
Under the recapitalization scheme, Hyundai Construction Equipment will issue rights for 1,380,000 new common shares to raise nearly 340 billion won and Hyundai Electric rights in 1,420,000 new common shares for 270 billion won.
Shareholders can choose to exercise the right and buy the shares at a 20-percent discount.
One bonus share would be issued by the two companies at a cost of 5,000 won apiece to every outstanding share.
Hyundai Construction Equipment’s new shares will be listed on November 23, and those of Hyundai Electric on November 28.
Both Hyundai Construction Equipment and Hyundai Electric were part of South Korea’s top shipbuilder Hyundai Heavy Industries Co. before they were spun off earlier this year.
Hyundai Construction Equipment as well as Hyundai Electric plan to use the proceeds from the new capital on beefing up overseas business. Hyundai Construction Equipment will use the extra cash to add new overseas offices in emerging markets like China and India in addition to setting up product testing lab. Hyundai Electric will add new offices in Europe including Bulgaria and turn production sites into smart factories.
The recapitalization would help generate cash flow of around 1 trillion won on the balance sheet and bring down Hyundai Construction Equipment’s debt ratio to 89 percent and that of Hyundai Electric to 108 percent, said officials from the two companies.
Shares of Hyundai Construction Equipment finished Tuesday at 357,000 won, up 5,000 won or 1.42 percent from the previous session. Those of Hyundai Electric & Energy Systems fell 8.88 percent and closed at 251,500 won.
By Moon Ji-woong
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