Hyundai Motor Securities Issues 23 Billion Won Equity-Linked Bonds Based on KEPCO Stock... Low-Risk Rating but Investors Should Note Principal Loss Risk and Liquidity Constraints
Hyundai Motor Securities is issuing two series of equity-linked bonds worth 23 billion won based on KEPCO common stock. Series 1591 and 1592 are 3 billion and 20 billion won respectively, maturing in June and December 2027, with a face value of 10,000 won each. They have a digital option structure paying annual returns of 3.751% and 4.001% if the underlying asset closes at or above 200% of the initial strike price at maturity.
These securities are not covered by the Depositor Protection Act, posing principal loss risk, and are unlisted, limiting liquidity. The issuer's credit rating is AA- which is sound, but early redemption is based on fair value and there is credit risk if the issuer's financial condition deteriorates.
The proceeds will be used for hedging in underlying assets and derivatives, a routine capital allocation for a securities firm. The underlying KEPCO stock has high volatility of 72.11% and 68.11% respectively, with a 20-year range of 16,190 to 67,900 won.
Subscription is limited to retirement pension funds on June 30, 2026. The issuance may be cancelled if total subscription is below 200 million won, and allocation is proportional.
[AI Summary]This ELB issuance by Hyundai Motor Securities is neutral for shareholders as it involves debt without dilution. The use of proceeds is standard hedging, and the issuer's AA- rating is strong, but the unlisted nature and lack of deposit protection pose risks to investors. Final score 5 neutral, with KEPCO's stock performance key to returns.