1. T’way Air Announces ₩40 Billion Convertible Bond Issuance
T’way Air will issue ₩40 billion worth of convertible bonds through a private placement on August 21, 2025. The conversion price is set at ₩1,954, similar to the current stock price, with a coupon rate of 5.50%. Conversion requests can be made starting August 22, 2026.
2. Why Issue Convertible Bonds?
Despite recovering passenger demand after the COVID-19 pandemic, T’way Air is facing profitability challenges due to rising fuel costs, lease expenses, and labor costs. Its high debt-to-equity ratio also adds to its financial burden. This CB issuance is interpreted as a move to improve its financial structure and secure operating funds.
3. Impact on Stock Price
- Positive Impacts:
- Short-term improvement in financial structure.
- Increased investment appeal due to potential conversion if the stock price rises.
- Negative Impacts:
- Potential dilution of conversion value if the stock price falls.
- Concerns about dilution of existing shareholders’ equity upon conversion to common stock.
- Increased burden of interest expenses.
4. Investor Action Plan
Investors should carefully consider the following:
- Stock price trends relative to the conversion price.
- Specific details and effectiveness of the fund utilization plan.
- Impact of macroeconomic variables such as interest rates, exchange rates, and oil prices.
- T’way Air’s competitiveness compared to competing LCCs.
It is crucial to focus on the potential for long-term corporate value enhancement rather than short-term stock price fluctuations and make prudent investment decisions.
Frequently Asked Questions
What are convertible bonds?
Convertible bonds (CBs) are bonds that can be converted into shares of the issuing company’s stock after a certain period. Investors can receive bond interest or convert to stock to profit from stock price appreciation.
How will T’way Air’s convertible bond issuance affect its stock price?
In the short term, it could positively impact due to expectations of financial structure improvement, but there are concerns about conversion value dilution and equity dilution if the stock price falls.
What are the key investment considerations?
Investors should consider stock price trends relative to the conversion price, fund utilization plans, macroeconomic conditions, and competitiveness against other LCCs. Focusing on long-term corporate value enhancement rather than short-term gains is essential.
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