Virus-hit firms look to raise capital to ensure liquidity

As the number of moviegoers, air passengers and shoppers shrank sharply largely due to the coronavirus outbreak and social distancing, related companies have recently turned to fundraising efforts to meet the deadline for debt repayment or refinancing. Also, those raising share capital are offering equities at a discounted price to subscribers in order to ensure success.

A leading example is multiplex cinema operator CJ CGV, which aims to raise 250.2 billion won ($202.9 million) in July from investors by issuing 13.9 million new shares, filings showed Sunday.

Each new share costs 17,950 won, which is 15 percent lower than the existing shares’ Friday closing price.

The desperate move, first unveiled on May 8, comes as the nation’s No. 1 movie theater operator struggles with the ballooning losses. CJ CGV recorded a 118.6 billion won net loss in the first quarter, up from less than 10 billion won the year before.

CJ CGV plans to use the new capital to pay back lenders including the Export-Import Bank of Korea and Sumitomo Mitsui Banking Corp., refinance its debt instruments and reduce the accounts payable balance by an amount equal to what it owes film distributors including Walt Disney Company Korea, according to the filing.

The firm’s largest shareholder CJ Corp. pledged to inject 97.3 billion won.

This comes along with another finalized 1 trillion won capital increase scheme by the nation’s flag carrier, Korean Air.

If Korean Air manages to raise the share capital in July with a share price over 30 percent lower, Korean Air will be able to meet the deadline to repay debts that use aircraft as collateral. Lenders include the Korea Development Bank, HSBC, ING and NH Investment & Securities. Korean Air’s largest shareholder, Hanjin KAL, will subscribe to 300 billion won worth of shares.

This is an addition to 1.2 trillion won financial support from KDB and Eximbank in exchange for either asset-backed securities, convertible bonds with no maturity date or asset-backed loans.

Another virus-hit company, Hyundai Department Store, also unveiled plans to raise 150 billion won debt to refinance short-term borrowings from BNK Investment & Securities and Shinyoung Securities. The subscription to the bonds is expected to take place on May 27.

By Son Ji-hyoung (consnow@heraldcorp.com)