Creditor Groups Sold Only 16 Companies

Because the Lancing Group’s intention to take over Sangyong Motors has failed, and the labor union of the Daewoo Synthesis Machinery has made inroads into the competition surrounding the takeover of the auto company, the ongoing search for takeover candidates is attracting a lot of attention from the public.

If they remain a heavy stockholder or debtor, the creditor group should collect lent credits back or sell the company to another owner when the takeover of a company is successfully completed.

Once they sell the company, the creditor group can free itself from the uncertainty of the future and recover the lent credits. But, it is not such an easy to seek a new buyer.

“We consider two criteria, that their assets can fully cover the amount of credits and their intention and ability can lead the once bankrupted company to prosperity,” stated a deputy banker of the Woori Bank, Lee Soon-woo.

But, working-level employers have made a complaint that ability and money do not always harmonize with each other.

Shin Dong Bang, which merged with the CJ Consortium in this January, has been the subject of attempted takeovers from Lotte Samgang in 2001, and the Dongwon Consortium in 2003, but both attempts failed due to a lack of assets.

“The sale of a company can be accomplished with a consensus from three sides, the creditor, the candidate for the take over, and the employees of the target company,” remarked the chief of company reformation department of Hana Bank, Lee Nam-yong.

In particular, employees can be sensitive over the status of their employment after the take over procedure ends. Creditors usually try hard to leave employment decisions out of their profit-oriented calculus, and suggest succession of employment status as a prerequisite to the take over process to candidates.

Among the 35 companies, which have creditor groups as their main stockholders, 16 companies have shown a penchant for takeovers.

All of these 16 companies have been merged by domestic capital. Eight companies have been taken over by a single company in same industry, and the other eight companies by consortiums that include companies in same industry field as their new owner.

Kangwon Industry merged with INI Steel back in March, 2000, and Namkwang Engineering and Construction, which finished off the takeover period first among all others, was sold to the consortium with a real-estate developer as part of the purchase package.

As for the means of sale, stock takeovers account for 10 cases, followed by stock-dept takeovers, asset-debt takeovers, and new share issue takeovers.

On the other hand, Byucksan Construction was merged by former chairman Kim Hee-chul this April, the sole example of a former owner recovering its ownership among the 16 bankrupted companies.

In addition, former Kohap Group chairman Jang Chi-hyok and former Hanbo Group chairman Jung Tae-su, have also tried to recover their rights of ownership to KP Chemical and Hanbo Steel respectively, stirring a hot conflict.

But a Woori Bank official explained that the example of Byucksan is totally different from the other two examples. “Chairman Kim decided to purchase the stocks of his company in order to minimize the damage of the creditor group by assuming the responsibility of his younger brother’s insincere management.”

Kim purchased Byucksan stocks at a price of 5,657 won per share, which is slightly higher than the normal market price, and bought a total of 19.32 million shares.

The Korea Fund Management Corporation and Public Fund Management Committee have decided to allow the participation of the labor union of the Daewoo Synthesis Machinery into the takeover competition, and received documentation of their application on May 4.

The labor union asserts that “the stability of the relationship between the labor union and the executive layer will be the biggest advantage if it succeeds.” But the uncertainty over the labor union’s asset power and their management ability has stirred up many conflicts.

Suk-Ho Shin kyle@donga.com