Jeju Air plans to raise more funds in bond issuance Budget airline seeks to secure more funds to improve financial soundness and stabilize business

Translated by Kim So-in 공개 2022-05-17 08:02:13

이 기사는 2022년 05월 17일 08:01 더벨 유료페이지에 표출된 기사입니다.

South Korea’s low-cost carrier Jeju Air is seeking to raise up to 150 billion won ($117 million), six months after it received state financial support at the end of last year.

Jeju Air recently said in its regulatory filing that it will issue a hybrid bond worth up to 150 billion won. It is a perpetual bond with a maturity of 30 years and bondholders are allowed to extend the maturity as much as they want. The company already raised 63 billion won and is planning to raise up to 87 billion won on May 26.

The yield is quite high at 7.4% per annum, with additional 5% added after one year. After that, the yield will go up by 1% each year. Jeju Air sold its perpetual fund to Korea Development Bank in 2020 and 2021 at a yield of around 5%.

The bond includes a call option allowing the issuer to pay back one year after issuance. This will help the carrier reduce its financial expenses. The loss-making company spent 22.5 billion won as financial expenses last year.

Jeju Air is not in urgent need of funds it already raised hundreds of billions of won at the end of last year as it aimed to secure its working capital in advance amid uncertain business conditions.

The carrier raised 206.6 billion won in a rights offering in November 2021 and secured 150 billion won from the country’s key industry stabilization fund. This boosted the company’s cash reserves to 284.9 billion won, up 120 billion won from the end of 2020.

The latest decision to raise additional funds is aimed at bolstering its financial soundness. Jeju Air’s financial statement has significantly weakened as it has suffered losses of nearly 300 billion won each year over the past two years. Its debt-to-equity ratio skyrocketed to 586% at the end of last year as its debt increased by 140 billion won in just one year.

The company also plans to stabilize it business. Although international travel is recovering recently, concerns in the airline industry remain due to external factors including oil prices, foreign exchange and ongoing pandemic.

Some market watchers said the company is seeking to secure new growth engine. Jeju Air has recently joined a consortium of six companies to provide urban air mobility (UAM) services in efforts to find a new growth driver.

Jeju Air will also adopt a cargo plane next month for the first time among local low-cost carriers. (Reporting by Su-jin Yoo)
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