SK Global Banned to Collect Bonds for 3 Months

SK Global was banned from collecting bonds for the next three months under the Corporate Restructuring Promotion Law.

However, some forecast that as the debt of SK Global was found to be much higher than expected, debt-equity swaps may be necessary during the course of the investigation.

Management rights of SK Group Chairman Chey Tae-won could then be threatened because he will have to sell his shares of SK subsidiaries, which he has offered as collateral, to pay off his debt.

Creditors of SK Global announced in the general meeting on March 19 that the Corporate Restructuring Promotion Law, the former workout, will be applied to the beleaguered company. They also decided to roll over the expiration of the existing bonds for three months.

“An accounting firm will conduct a close investigation into the SK Global headquarters and 13 overseas subsidiaries and the results will come out in late April or early May,” an official said. “If the results reveal that it is difficult for the company to pay off the debt with sales profits, debt-equity swaps will be inevitable.”

SK Global made a public announcement on March 11 that if the amount of the window-dressing is taken into consideration, the total assets as of late last year reached 6.3324 trillion won, at a total debt of 5.7407 trillion won, and the equity capital standing at 591.7 billion won.

Estimated total debt showed that general bonds alone for banks at home and abroad amount to 5.4703 trillion won, and bonds for pension funds stand at 668.5 billion won. Therefore, the result of the investigation may reveal that debts are much higher than assets.

In the meantime, the creditors decided to pay off 115 million dollars of Commercial Paper (CP) that SK Global`s subsidiaries in America had issued. They have paid 2.6 million dollars on which the maturity date ended on March 17.

If local banks do not pay off their debt by the expiration date, foreign investors will declare bankruptcy against them, because the banks guaranteed for the company`s CPs.

Local creditors are expected to persuade overseas creditors for leniency from early April..

Do-Young Kim Chi-Young Shin nirvana1@donga.com higgledy@donga.com