Creditors Should Take Brunt of Responsibility for SK Global

Sovereign Asset Management Inc., Crest Securities` parent company and the largest shareholder of SK Corporation, said yesterday that SK Global`s creditors should take responsibility for their loans to SK‘s flagship company.

In yesterday`s press release, Sovereign claimed: “Creditor banks should acknowledge their failures in managing loan risk, which resulted in a capital loss of 4.4 trillion won. They should bear full responsibility of the results.”

Criticizing the president of Hana Bank, Kim Seung-yu`s recent remarks, the Monaco-based fund said, “President Kim`s remark translates into writing off a fundamental principle of the stock company system.” The bank head in a recent remark said that “shareholders` interests can be ignored as they are nothing but a group of speculative investors.”

Sovereign went further to call for the SK Board of Directors not to approve aid to SK Global. “It is against commerce laws for any individual at SK Corp. or creditor banks of SK Global to attempt to save SK Global,” a representative said. “The Board of Directors has a responsibility to the shareholders.”

On the same day, SK Corp. announced a schedule to hold a board meeting at its headquarters in Seorin-dong, Jongno-gu, Seoul on Monday.

“The meeting on June 10 will take the form of an informal gathering, in which the management of internal directors will present outside directors with the company‘s negotiation process with its creditors,” said a staff member at SK Corp. and “that it will not be an official meeting where decisions are made if and how the debt-equity swap is applicable.”

It is known that SK Global`s creditors have been seeking ways to transform a considerable amount of listed and non-listed affiliates’ equity, possessed by the company‘s chairman Chey Tae-won into cash funds.

A source in the creditors said, “Chairman Chey’s mortgaged stock holdings should be used properly in easing SK‘s capital loss”, and added, “a plan is to liquidate equity and, if necessary, turn it into a cash fund for SK Global, but Chey`s controlling stakes won‘t be hurt.”

Chairman Chey`s stock holdings mortgaged by creditors include a 0.11% stake in SK Corp., 3.31% in SK Global, 6.84% in SK Chemical (listed companies), as well as 40% in Sheraton Walker Hill Hotel and 44.5% in SK C&C (non-listed companies).

Joong-Hyun Park sanjuck@donga.com