[비즈한국] PeopleBio304840, a company specializing in Alzheimer's blood diagnostic kits, has finally signed a new real estate acquisition contract after many twists and turns. The company changed the subject of its acquisition from a property with an abandoned building in Gangnam-gu, Seoul, which had been practically left to rot, to a property in the heart of Daechi-dong that is being leased in its entirety by a major college preparatory academy. While expectations are rising that PeopleBio will be able to catch its breath regarding the loss-before-income-tax-expense (LBT) ratio requirement by increasing its capital, concerns are being raised that the debt and interest costs taken on during the acquisition process could become another shackle.
On the 23rd, PeopleBio signed a contract with Human Data, a non-residential real estate management company, to acquire land and buildings located at 939-24, 939-30, and 939-11 Daechi-dong, Gangnam-gu, Seoul. The land area is 1,197㎡, and the building has a total floor area of 5,191.25㎡, spanning three basement levels and seven floors above ground. Currently, the building is being leased and used by a private college prep academy operated by Gangnam Daesung Academy.
Of the total purchase price of 98.3 billion KRW, 35.6 billion KRW—representing the down payment and interim payments—will be offset against the proceeds from the issuance of the 8th bearer interest-bearing unsecured private perpetual convertible bonds. The remaining balance of 62.7 billion KRW will be covered by assuming the existing loans secured against the property. This means the company has purchased a property worth 100 billion KRW while holding less than 600 million KRW in cash and cash equivalents. PeopleBio had previously intended to acquire a different property worth 89 billion KRW with 62 billion KRW in debt on the 12th of last month, but later changed the target.
The industry believes that PeopleBio purchased the property to resolve its LBT issues. Listed companies must maintain an LBT-to-equity ratio of 50% or less. Failing to meet this requirement twice or more within three years can lead to the company being designated as an administrative issue, and potentially being delisted following an eligibility review by the exchange. PeopleBio's LBT ratio reached 88.4% in 2023 and 159.7% in 2024. As of the third quarter of this year, its total capital is only 1.7 billion KRW, resulting in an LBT ratio of 338.8%. To lower the LBT ratio, the company must either reduce losses or increase equity. It appears PeopleBio intends to boost its capital by 35.6 billion KRW by issuing perpetual convertible bonds, which are recognized as capital in accounting, despite an increase in liabilities of 62 billion KRW.
However, even if the LBT issue is resolved, it is expected to be difficult in the long term for PeopleBio to achieve the "financial structure improvement" it cited as the purpose for this real estate acquisition. This is due to the interest burden from the perpetual convertible bonds and the loans on the property.
The annual interest (at a 2% annual rate) on the 35.6 billion KRW in perpetual convertible bonds issued for the down and interim payments amounts to 712 million KRW per year. On top of this, the company must pay interest on the assumed property loans for the remaining balance of 62.7 billion KRW. According to Human Data's audit report, the annual interest rate on long-term loans borrowed from financial institutions using the property as collateral ranges from 5.18% to 6.76%, meaning the annual interest on the loans alone is estimated at 3.2 billion to 3.6 billion KRW. The total annual cost PeopleBio must bear due to this acquisition exceeds 4 billion KRW. Even with 2.64 billion KRW in annual rental income, this effectively means an annual cash outflow of approximately 1.5 billion KRW.
PeopleBio is a company that develops dementia diagnostic kits based on blood samples and has received approval for its dementia diagnostic kit 'AlzOn' in Korea and the Hainan Medical Zone in China. However, it has continued to record operating losses since its KOSDAQ listing in December 2020. The company recorded: 600 million KRW in revenue and a 7.2 billion KRW operating loss in 2021; 4.4 billion KRW in revenue and an 11.7 billion KRW operating loss in 2022; 4.5 billion KRW in revenue and a 15.2 billion KRW operating loss in 2023; and 3.7 billion KRW in revenue and an 11.5 billion KRW operating loss in 2024. As of the third quarter of this year, its cumulative revenue stands at 2.7 billion KRW, with an operating loss of 6.6 billion KRW.