HYBE, the massive entertainment conglomerate behind BTS and other K-pop acts, has found itself in a tight financial situation after bondholders unexpectedly called for early repayment of KRW 400 billion worth of corporate debt. According to reports, HYBE will raise the funds through a new public bond offering within the next few weeks.
It’s an abrupt about-face for the industry leader. Investors holding convertible bonds issued by HYBE in 2021 opted to redeem them early, despite generous 0% interest and conversion terms. But with HYBE shares falling 25% in the past year, the bonds no longer offered an attractive premium. Nearly all bondholders (99.95%) requested repayment by November 5th.
HYBE insists its finances remain solid. At a recent town hall, CEO Jaesang Lee stressed over KRW 1.2 trillion in cash assets. The firm’s mid-year report listed KRW 1.075 trillion in available funds versus KRW 714 billion in current liabilities.
Rather than tapping vast reserves, HYBE planned to raise the KRW 400 billion through a public bond sale which started on October 17th. Crucially, the new bonds carry a 20% premium to HYBE’s currently depressed share price.
Mirae Asset Securities, Korea’s top investment bank, will underwrite the vast majority (KRW 390 billion) of the offering. A Mirae executive expressed confidence in strong demand, noting institutional interest in HYBE’s “undervalued” stock.
The bond refinancing caps a tumultuous year for HYBE. Plunging revenues in Q1 accompanied a very public leadership dispute involving subsidiary ADOR. While Q2 revenue reached a record high, the broader market malaise has continued hammering stock prices across the K-pop sector.
