Hanwha Solutions rights issue cut to $810 million after 21% discount

SEOUL, July 21 (AJP) -Hanwha Solutions has bowed to regulatory scrutiny by finalizing on Monday a scaled-back 1.17 trillion won ($810 million) rights offering, less than half the 2.4 trillion won it originally planned to raise.

The final fundraising reflects months of regulatory intervention and investor backlash that forced repeated revisions to one of South Korea's largest equity offerings this year, before a slide in the company's share price further reduced the proceeds through a lower issue price, its disclosures showed.  

The Hanwha Group energy and chemicals unit set the final subscription price at 22,100 won per share, about 21 percent below the preliminary issue price of 27,900 won announced last month.

The company will issue 53 million new shares, raising 1.1713 trillion won through a shareholder rights offering. Any unsubscribed shares will be offered in a public subscription on July 27-28, with the new shares scheduled to begin trading on Aug. 11.

The final amount compares with the 1.48 trillion won expected under the preliminary pricing and is less than half the 2.4 trillion won fundraising plan unveiled in March.

Shares on Tuesday opened nearly 2 percent lower from Monday's close at 26,250 won.   

The company also revised how it will use the proceeds.

Investment in facilities will remain unchanged at 907.7 billion won, while funds earmarked for debt repayment have been reduced to 263.6 billion won from the previously planned 571 billion won. Hanwha Solutions said it will bridge the funding gap through internal financing, including additional liquidity secured in the United States.

The rights issue has been under unusually close scrutiny since its announcement in March.

The Financial Supervisory Service twice ordered Hanwha Solutions to revise its securities registration statement, saying the filing lacked sufficient disclosure on matters material to investors' decision-making. The regulatory action delayed the offering and forced the company to provide more detailed explanations of its financing plans and capital allocation.

The original proposal called for raising 2.4 trillion won, with 1.5 trillion won allocated to debt repayment and 900 billion won for investments in its solar and other growth businesses. The scale of the issuance, equivalent to roughly 42 percent of outstanding shares, triggered an immediate market backlash, sending Hanwha Solutions shares down more than 20 percent over two trading sessions.

Minority shareholders criticized the transaction as placing the burden of balance-sheet repair on existing investors through substantial dilution despite the group's aggressive expansion strategy.

The offering was subsequently reduced to about 1.7 trillion won during the review process before the continued decline in the company's share price lowered the final issue price and trimmed the proceeds further to 1.17 trillion won.

The transaction also renewed scrutiny of the Hanwha Group's broader capital-raising strategy.
  Earlier this year, Hanwha Aerospace was forced to revise its record 3.6 trillion won rights offering after investors objected to the scale of dilution despite the defense company's strong cash generation. The company eventually cut the offering to 2.3 trillion won and replaced part of the financing with capital from group affiliates.

The repeated pattern of announcing large equity offerings, suffering sharp share-price declines and subsequently restructuring the fundraising has intensified debate over the group's capital allocation and treatment of minority shareholders.

To bolster confidence in the latest fundraising, Hanwha Corp., which owns about 36.7 percent of Hanwha Solutions, committed to fully subscribe to its allotted shares and purchase an additional 20 percent through oversubscription, investing about 843.9 billion won.

Employee shareholders will subscribe on July 22, followed by existing shareholders on July 22-23. Any remaining shares will be offered to the public on July 27-28, with payment due on July 30.

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