Hanwha Solutions is demonstrating a strong commitment to a capital increase of 1.8 trillion won ($1.4 billion) despite two previous setbacks from financial authorities. The company has significantly enhanced its securities registration statement to address the authorities' concerns regarding the necessity of the capital increase, asset sale plans, and performance forecasts, leading to increased optimism about its success.
According to industry sources on May 22, the securities registration statement submitted by Hanwha Solutions on May 14 will take effect on May 30.
The Financial Supervisory Service (FSS) must issue a relevant disclosure by 8 p.m. on May 29 if it intends to reject the registration statement. If no further action is taken by that deadline, the statement will take effect, allowing the capital increase process to proceed as planned.
During the FSS review process, Hanwha Solutions faced two rounds of correction requests over the past two months, requiring modifications to its plans. Initially, the capital increase amount was reduced from 2.4 trillion won to 1.8114 trillion won, but the FSS raised a second objection, citing insufficient explanations for investor protection.
In the third securities registration statement submitted by Hanwha Solutions, the capital increase amount remains unchanged. Of the total, 907.7 billion won will be allocated for solar investments, including the establishment of a perovskite tandem production line, while 906.7 billion won will be used to repay debts accumulated due to a downturn in the petrochemical sector. This decision reflects the company's belief that reducing the capital increase amount is not feasible given the global uncertainties in the solar and petrochemical markets. The parent company, Hanwha Group, plans to participate in the capital increase with a subscription exceeding 120%, which will help offset most of the debt repayment costs.
In response to the FSS's concerns, Hanwha Solutions has strengthened its registration statement by including detailed information on liquidity risks, alternative funding options including the sale of non-core assets, specific grounds for medium- to long-term profit estimates, and future credit rating outlooks. As a result, the length of the registration statement has increased significantly from 920 pages to 1,260 pages.
As an additional funding method outside the capital increase, the company is considering selling part of its stakes in Hanwha Impact and Hanwha Hotels & Resorts. This move aims to secure approximately 300 billion won in liquidity by the third quarter of this year.
The company predicts that if its credit rating falls from the current 'AA- (negative)' to below 'A+', it could incur over 75 billion won in additional financial costs due to rising corporate bond rates. The capital increase is one of the measures to prevent such financial burdens while aiming to reduce the consolidated debt ratio to below 150%.
Additionally, the company has set a target to achieve sales of 33 trillion won and operating profit of 2.9 trillion won by 2030 without any further capital increases.
Investment banking sources view the likelihood of Hanwha Solutions' third capital increase attempt succeeding as a toss-up. While the company has provided detailed financial information to investors in line with FSS requirements, some small shareholders continue to express opposition, raising concerns that the FSS may request further corrections.
The FSS is responsible for reviewing the securities registration statement to protect investors but does not have the authority to cancel the company's decision to pursue a capital increase. However, if the registration statement fails to pass review three times, it is common for the company to voluntarily cancel the capital increase.
Meanwhile, some small shareholders of Hanwha Solutions are demanding that the company secure funds by selling its stake in Korea Zinc held by its subsidiary, Hanwha Impact. However, Hanwha Solutions has reportedly expressed reluctance, as selling this stake would not directly result in cash inflow to the company.
* This article has been translated by AI.
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