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(Seoul=Yonhap Infomax) Gyeong Eun Park = Daishin Securities Co. is set to strengthen its capital base through the issuance of redeemable convertible preferred shares (RCPS), aiming to reinforce its investment banking (IB) operations.
With this move, Daishin Securities will become a securities firm with over 4 trillion won ($2.6 billion) in equity capital, marking a significant step toward joining the ranks of South Korea’s mega-investment banks (mega-IBs) and entering the short-term note issuance business.
On the 20th, Daishin Securities announced plans to issue RCPS worth 335 billion won ($260 million). According to its regulatory filing, the company will issue the RCPS via a third-party allotment, divided into three tranches: approximately 177 billion won, 46 billion won, and 112 billion won, respectively. Investors include four entities such as Daishin RCJ2 Co., and six others including Daishin RCJ3 Co. and Daishin RCJ1 Co.
As of the end of the third quarter, Daishin Securities’ standalone equity capital stood at 3.7312 trillion won ($2.9 billion). With the additional 335 billion won, the firm will meet the 4 trillion won capital requirement for the short-term note issuance business, a key threshold for mega-IB status in South Korea.
The Financial Services Commission (FSC) announced in April that, starting next year, it will tighten approval standards for securities firms. Previously, companies only needed to meet capital requirements at the time of application. Going forward, they must satisfy financial criteria for two consecutive years based on annual settlements, and demonstrate competitiveness for two years between designation as a comprehensive investment business entity and as a mega-IB.
In response, Daishin Securities has proactively begun efforts to meet the capital requirements by the end of this year. After scaling up, the company is expected to apply for short-term note issuance approval in two years, following a period of preparation.
If Kiwoom Securities Co., which was the first to obtain a short-term finance business license this year, is followed by Samsung Securities Co., Hana Securities Co., Shinhan Investment Corp., and Meritz Securities Co. in passing regulatory review, Daishin Securities could become the 10th player in the short-term note issuance market.
RCPS has been a consistent pillar of Daishin Securities’ capital strategy. In March last year, the company issued 230 billion won ($180 million) in RCPS to target comprehensive investment business status. That issuance pushed its equity capital above 3 trillion won, making Daishin Securities the 10th comprehensive investment business entity in South Korea.
With this designation, the company’s corporate credit extension limit doubled from 100% to 200%, and its prime brokerage service (PBS) business expanded, laying the groundwork for aggressive IB growth.
In August, Daishin Securities redeemed and canceled 70 billion won ($54 million) in RCPS that had reached maturity, demonstrating active capital management.
Since achieving comprehensive investment business status, Daishin Securities has focused on strengthening its IB competitiveness in pursuit of another leap toward mega-IB status.
The company has accelerated growth by recruiting seasoned IB professionals and establishing new teams for acquisition finance and syndication. These efforts were most evident in this year’s personnel changes. Daishin Securities expects its organizational expansion to drive growth from next year, and has elevated the IB division’s status accordingly.
Notably, Park Sung-jun, head of the IB division, was promoted to vice president, and the IB division itself was upgraded to an IB headquarters. The last time Daishin Securities had a vice president-level executive dedicated to IB was six years ago, when CEO Oh Ik-geun led the IB business unit. However, Oh also oversaw management support, making this the first time a vice president will focus solely on IB. The promotion recognizes the division’s achievements and clarifies its future direction.
Under the new structure, the IB headquarters now includes IPO, Corporate Finance 1, and Corporate Finance 2 divisions. Previously, IPO and Corporate Finance 1 & 2 were sub-units within the IB division. As a result, Daishin Securities’ IB organization has shifted from a one-division, five-team structure to a headquarters with three divisions and three teams.
With more specialized roles, the company is expected to accelerate deal sourcing and expand coverage next year.
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gepark@yna.co.kr
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