Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Korea Stubs Status Check: 15 in Total Incl. 3 New Ones

Korea Single Subsidiary Stub Trade: 18 in Total with 3 New Ones

Korea Synthetic Subsidiary Stub Trade: 7 in Total with 1 New One

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

The Seoul Bankruptcy Court and Anjin Accounting Corporation (the M&amp;A advisory) are scheduled to hold a main bid for the sale of Eastar Jet on June 14. Preliminary bidders who have completed the preliminary due diligence by June 7 are eligible to participate in the main bid. Then, we will likely see the name of a bid winner about a week later, around June 21.Harim Group also issued a letter of intent (LOI). In the case of Harim, Pan Ocean will be an acquiring company.Eastar Jet is a low-cost airline, which has been in financial trouble. It has been undergoing corporate rehabilitation since February this year. Well, Eastar Jet had once found a new owner back in 2019. Aekyung Group won the bid to take over Eastar Jet. However, Aekyung abandoned the acquisition of Eastar Jet last year due to financial insolvency and COVID-19.Harim must acquire a 39.64% controlling stake owned by Eastar Holdings. The sale price of Eastar Jet is about ₩150B. However, the actual cost is estimated to be over ₩300B. Eastar Jet's total debt is about ₩219B, of which 65B is unpaid wages, suggesting that the actual debt that the acquirer has to bear is around ₩200B.<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Eastar Jet financials, as of 1Q21"}'>Eastar Jet quarterly financials, as of 1Q21</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales"}'>Sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":90.8}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩90.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operating profit"}'>Operating profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-35.9}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>-₩35.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net profit"}'>Net profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-41}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>-₩41.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Cash holding"}'>Cash holding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩1.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total liabilities"}'>Total liabilities</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":218.7}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩218.7B</td>
</tr>
<tr>
<td> - Unpaid wages</td>
<td style="text-align: right;">₩64.9B</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>Harim plans to use Pan Ocean, a shipping company, as the main vehicle to acquire Eastar Jet. Pan Ocean is the second-largest shipping company in Korea in terms of sales. As of the end of the first quarter, its cash equivalent assets stood at ₩150B. However, Harim is said to be seeking a FI (financial investor).What is Harim's big picture here, business-wise? Pan Ocean can expand its aviation logistics business by leveraging Eastar Jet's aviation resources. Harim plans to grow into a more comprehensive logistics company that encompasses sea and air.

The Seoul Bankruptcy Court and Anjin Accounting Corporation (the M&amp;A advisory) are scheduled to hold a main bid for the sale of Eastar Jet on June 14. Preliminary bidders who have completed the preliminary due diligence by June 7 are eligible to participate in the main bid. Then, we will likely see the name of a bid winner about a week later, around June 21.Harim Group also issued a letter of intent (LOI). In the case of Harim, Pan Ocean will be an acquiring company.Eastar Jet is a low-cost airline, which has been in financial trouble. It has been undergoing corporate rehabilitation since February this year. Well, Eastar Jet had once found a new owner back in 2019. Aekyung Group won the bid to take over Eastar Jet. However, Aekyung abandoned the acquisition of Eastar Jet last year due to financial insolvency and COVID-19.Harim must acquire a 39.64% controlling stake owned by Eastar Holdings. The sale price of Eastar Jet is about ₩150B. However, the actual cost is estimated to be over ₩300B. Eastar Jet's total debt is about ₩219B, of which 65B is unpaid wages, suggesting that the actual debt that the acquirer has to bear is around ₩200B.





Eastar Jet quarterly financials, as of 1Q21

Sales
₩90.8B


Operating profit
-₩35.9B


Net profit
-₩41.0B


Cash holding
₩1.0B


Total liabilities
₩218.7B


 - Unpaid wages
₩64.9B

Source: DART

Harim plans to use Pan Ocean, a shipping company, as the main vehicle to acquire Eastar Jet. Pan Ocean is the second-largest shipping company in Korea in terms of sales. As of the end of the first quarter, its cash equivalent assets stood at ₩150B. However, Harim is said to be seeking a FI (financial investor).What is Harim's big picture here, business-wise? Pan Ocean can expand its aviation logistics business by leveraging Eastar Jet's aviation resources. Harim plans to grow into a more comprehensive logistics company that encompasses sea and air.

Harim Holdings Stub with Pan Ocean: Eastar Jet Takeover Situation