SK Securities Co., a former brokerage unit of South Korea’s SK Group that went under local private equity fund operator J&W Partners Ltd. earlier this year, will offer new shares worth 90 billion won ($78.8 million) this month to bolster capital and enhance its credit worthiness, sources from the investment banking industry said on Thursday.
Sources said SK Securities has received letters of commitment (LOC) from institutional investors including the Korea Development Bank, a move that will help secure funds for the rights offering.
The decision to issue new shares comes after the company saw its credit rating cut and profit shrink upon the change of its owner from a large conglomerate to a small private equity fund. SK Securities expects the capital increase would help it restore not only its capital but also its credit worthiness.
SK Holdings Co., the holding entity of the country’s third largest conglomerate SK Group, in March signed a contract to sell a 9.88 percent stake in SK Securities to J&W Partners, and the Financial Services Commission in July approved the sale worth around 51.5 billion won.
Local credit rating agencies, however, downgraded the brokerage’s credit rating as the company would no longer be able to rely on SK Group’s financial support. After its largest shareholder was changed to J&W Partners, Korea Investors Service revised down its rating from A to A- with stable outlook. Korea Ratings Corp. and NICE Investors Service Co. also lowered its credit rating by one notch.
The sale and credit rating downgrades have dealt a severe blow to the brokerage house. Contrary to its local rivals who enjoyed a business boom in the first half of this year, SK Securities’ net profit over the period plunged almost 50 percent to 10.7 billion won from 21.4 billion won in the same period last year.
The company expects the recapitalization would help it improve its overall business performance especially the investment banking business as it would push up its equity capital from around 430 billion won to 520 billion won.
On Friday, shares of SK Securities rose 0.79 percent to close at 897 won.
By Jin Young-tae and Choi Mira
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]