SK Global Seeing Signs of Recovery

Samil Accounting Corporation released its report on SK Global to SK Global creditors on May 19. The report showed that the amount of money lost by SK Global now stands at 4.387 trillion won, much less than expected. The figures have raised some hope for the company`s revival. On this positive note, the possibility of Chairman Choi Tae-won returning to a management position is currently under discussion.

SK lacks distinct self-preservation measures

The accounting firm reported to creditors that SK Global`s substantial value reached a negative 4.387 trillion won with its clearing value standing at a negative 5.918 trillion won with hidden overseas asset value amounting to 422 billion won.

These figures are smaller than originally expected by creditors. It was reported that creditors have directed themselves towards reviving SK Group if the company comes up with more reasonable measures for recovery on its own.

Creditors are asking SK Corporation to turn its 1.300 trillion won in total sales of bonds to stock market shares, but the company stated that only 700 billion won can be changed over, mentioning some capital flow problems. SK also stated that is would be difficult to persuade its major shareholder Sovereign Asset Management to increase the amount. Further, if all of the bonds are given up, it is highly likely that the cash-strapped company might find itself in more trouble.

SK Group plans to release its own measures to increase its income from sales and reduce its overseas sales network. It is also considering ways to dispose of listed shares in SK Telecom, SK Securities and POSCO as well as non-listed shares in Walker hill and SK Life.

The struggle between creditors and the SK Group is expected to continue until the final decision on June 18.

Will Chairman Choi return?

As hopes rise for the recovery of SK Global, some people are also discussing the possibility of Chairman Choi`s comeback to head the company.

The prosecution gave Choi a six year sentence at a previous session held on May 9. Given the fact that there is a six year cap on the possibility of probation, there are some observations that the prosecution may give him his freedom, albeit limited. This means that there is strong possibility for his return to his chairman`s seat in the next session held on May 30.

SK`s main creditor, Hana Bank is negative about disposing of Chairman Choi`s shares. Other creditor banks are suggesting that they should decrease some of the company`s burdens by getting rid of those shares. However, due to the already serious damage inflicted on SK Global shares, Choi`s shares would not do that much for creditors, as the money gained would only amount to around 100 billion won.

An official from the SK Group said: “The creditors reached a consensus that the owner should return to his position to mediate between different interest groups and implement proper work-out programs. He should come back soon. If the scenario goes as planned with the owner out of trouble, SK Group just might be able to get back on track. We need to figure out some way to eliminate any negative opinions people may have about his return to power, as he may not be able to have the same amount of influence as he once did before the troubles began.”

Sovereign is making strong demands for improvement in SK Group`s governance structure while major affiliate SK Telecom is attempting to go its own way. In this, the once-powerful grasp that the owner once shared in the company, may be considerably weaker than before.

Joong-Hyun Park Chi-Young Shin sanjuck@donga.com higgledy@donga.com