Hanbo Steel, Criticism of Dirt-Cheap Price Sale

As the Korea Asset Management Corporation (KAMCO) determined to sell ‘Hanbo Steel’ to AK Capital, US investment firm for USD 370 million, experts said that there are problems of disadvantageous conditions and the cheap price sale.

However, KAMCO said that it is an inevitable decision because of the best sale within an early period.

Before the date of the sales contract (December, 16), on December 13, the core of the dirt-cheap price sale is the company management result showing the recent favorable tendency according to staff of Hanbo Steel.

Operating only steel reinforcing factory in A zone, Dangjin, Chungnam, Hanbo Steel will have 70 billion won of cash profits this year. It is because a construction business was relieved from hardship and the steel demand largely increased. The company forecasts that the profits will increase to 100 billion won owing to many construction works. If the hot coil factory which has been currently interrupted, it is expected that the high profits will be made owing to good market situations such as the increasing price of the hot coil and insufficient supplies.

The official of Hanbo Steel said, “For the investment of the steel industry, the collection period is 8 year. The sales amount is 450 billion won and seem to be collected within only five years in the current management result of the company. Accordingly, we didn’t receive sufficient prices.”

Some officials said that giving 4 months from the contract to a completion of the prices payment is a generous condition. Also, there is the question on the financing capacity of AK. For last 8 months, USD 0.2 billion was financed, but the remaining USD 1700 billion has the financing difficulty.

However, KAMCO repelled, “They insist on a specialty of Hanbo Steel Sale.” Lee Cheol-Hun, executive director of KAMCO said, “The situation which we have to finish the sale work of 6 years after a bankruptcy in 1997 couldn’t lead a negotiation’

He also said that there were only three companies in the bids application expired last November and KAMCO cannot help hasting its sale.

He repelled, “The steel industry can not be hardly estimated in the future, and so we cannot judge on the basis of the current situation.”

Myung-Jai Lee mjlee@donga.com