Jeju Air (7C, Jeju) plans to raise up to KRW79 billion won (USD62.4 million) by issuing privately placed perpetual bonds this month in order to “secure financial soundness” as it prepares to ramp up its post-Covid operations.
“In preparation for the normalisation of international flights,” Jeju Air will shore up its finances through the issuance of the bonds, it said in a statement on May 25. The capital procurement is aimed at addressing concerns over its partial capital erosion ahead of the reopening of South Korea’s borders.
It planned to issue KRW16 billion (USD12.6 million) worth of private equity perpetual bonds on May 26, having already issued KRW63 billion (USD49.8 million) of them on May 12, it explained. It set the issuance rate at 7.4% per annum. After one year this will rise to 12.4%, and depending on the step-up conditions it will then increase by a further 1 percentage point each year.
This latest fundraising effort adds to about KRW206.6 billion (USD177 million at the time) it secured last October through a paid-in capital increase, and a total of KRW150 billion (USD120 million) in December including KRW 120 billion (USD95 million) in operating loans and KRW30 billion in another round of perpetual convertible bonds.
“As of the end of the first quarter of this year, we had more than KRW220 billion (USD174 million) in cash equivalents, which is sufficient, but we preemptively raised capital in this period before the reopening. We have chosen permanent bonds as a way to expand,” a Jeju Air representative told the Hankyung business daily. “In a situation where the bond market continues to struggle and high-quality corporate bonds are struggling, we have succeeded in issuing large-scale perpetual bonds.”
South Korea will resume 136 flights on 22 international routes starting next month, Yonhap News Agency reported the state-run Korea Airports Corporation as saying this week, as five more airports - Busan, Daegu, Jeju, Seoul Gimpo, and Yangyang - reopen routes to other countries from early June.