Hanwha Solutions has scaled back its planned rights offering from 2.4 trillion won to 1.8 trillion won ($1.6 billion to $1.2 billion), after facing scrutiny from South Korea’s financial regulator, the company said Friday.
The energy affiliate of Hanwha Group said in a regulatory filing that it submitted an amended securities registration statement reflecting the reduced fundraising plan.
Under the revised plan, Hanwha Solutions will issue 56 million new shares, down from the previously proposed 72 million shares. The offering price was also lowered to 32,400 won per share from 33,300 won.
As a result, the total amount to be raised dropped by about 600 billion won.
The company also revised its intended use of the proceeds. The amount earmarked for debt repayment was trimmed to 906.7 billion won, down from the originally planned 1.49 trillion won. The allocation for facility investment remained largely unchanged at around 900 billion won.
The rights offering ratio was also lowered to 0.2604 new shares per existing share from 0.3348.
The company said the offering will continue to be conducted first through a shareholder allocation, followed by a public offering for any unsubscribed shares. The subscription date is May 14.
The change came after the country’s financial watchdog, the Financial Supervisory Service, on April 9 ordered Hanwha Solutions to revise its securities registration statement, saying important details had been either missing or unclear, without elaborating further.
The regulator’s request suspended the effectiveness of the company’s original filing.
Hanwha Solutions had initially announced the large-scale rights offering in March, mainly to repay debt, with nearly two-thirds of the proceeds earmarked for that purpose. But the plan drew heavy criticism from shareholders because it would have sharply diluted existing shareholders while doing little to support future growth, as well as over the abrupt nature of the board's announcement.
Industry observers suggested that the scaled-back offering appears to be in response to a combination of regulatory scrutiny and shareholder backlash.
On Friday, Hanwha Solutions executives apologized for insufficient communication with shareholders.
“We sincerely apologize for causing great concern by not communicating enough with shareholders and the market about the scale and background of the rights offering in its initial stage,” said Nam Jung-woon, CEO of Hanwha Solutions’ chemical division and Park Seung-deok, CEO of its Qcells division. “We will do our best to actively communicate with shareholders and the market.”
The company also said that Hanwha Group Chair Kim Seung-youn will stop receiving compensation from Hanwha Solutions starting in May while continuing to oversee the company, a move it said reflects the chair's acceptance of management responsibility.
Hanwha Corp., as the largest shareholder of Hanwha Solutions with a 36.66 percent stake excluding treasury shares, will also participate in the rights offering, subscribing for more than its full allotment, applying for up to 120 percent of the shares allocated to it through oversubscription.
sahn@heraldcorp.com
