이 기사는 2019년 12월 20일 08:00 thebell 에 표출된 기사입니다.

South Korea’s homegrown private equity (PE) firm IMM Private Equity (IMM PE) is planning a recapitalization of its portfolio company Hollys F&B.

According to investment banking (IB) industry sources on December 13, IMM PE is preparing for the recapitalization of the coffee chain operator. It is said the firm is discussing the issue with Shinhan Bank which offered acquisition financing twice. The PE firm is planning the process to extend the maturity date of a fund which will mature next year. It’s unclear whether the firm will choose the recapitalization, or a refinance to simply repay its acquisition financing.

IMM PE made two rounds of recapitalization in 2016 and 2017. The firm completed a 65 billion won worth recapitalization in 2017 with a three-year maturity and an interest rate of around four percent. IMM PE is said to have cashed out approximately 60 billion won through the previous two rounds of recapitalization.

By the time the firm closes the planned recapitalization, IMM PE will likely retrieve most of money it invested in the company. IMM PE acquired the coffee chain operator in 2013 via its blind-pool fund IMM RoseGold II for 45 billion won. The firm raised 37 billion won via paid-in capital increase in 2014.

As Hollys F&B is showing some notable improvement in its earnings, the amount of acquisition financing is likely to increase. Hollys Coffee recorded sales of 154.9 billion won and operating profits of 16.3 billion won last year. Its earnings grew a lot, considering it recorded sales of 68.5 billion won and operating profits of 7 billion won in 2013. With 20 billion of additional borrowing, the PE firm is likely to retrieve the amount it invested.

IMM PE’s sale process will likely buy time from the recapitalization. IMM RoseGold II, the 736.1 billion won worth blind-pool fund launched in 2013, will mature next year. If the firm manages to retrieve most of the amount it invested, extending the maturity shouldn’t be a hard work. “Blind-pool funds are normally formed with a maturity of eight plus two years. If the firm cashes out the money it invested, its limited partners will easily agree to extend [the maturity],” said an industry source.

IMM PE reportedly has resumed the negotiation with potential buyers of the Hollys F&B. In 2016, the PE firm hired Deutsche Bank to lead the sale of management rights and negotiated with potential buyers, but the attempt flopped. Currently more than one potential buyer is showing interest in acquiring the company. However, the market widely views it will be difficult to find the buyer due to a wide valuation gap.

(By reporters Jo Se-hun and Kim Hye-ran)