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Third party to lead Korean firm Woongjin's overhaul
Publication Date : 08-10-2012
The court-appointed receiver that will lead Woongjin Group’s upcoming restructuring efforts is unlikely to be an existing member of the company’s managing staff, industry sources said on Sunday.
The speculation stems from the fact that Woongjin’s top brass including Chairman Yoon Seok-keum and his right-hand man Lee Joo-seok, along with Kim Jeong-hoon, CEO of Woongjin’s troubled construction arm Kukdong, were all sued by Hyundai Swiss Savings Bank last week for fraud.
Since local bankruptcy laws were revised and integrated in 2006, the court has refrained from appointing members of the management who were found to be enmeshed in legal problems.
“During our first court questioning on Friday, we explained why we refuse to accept Woongjin managers as receivers and thereby requested the court to appoint a third party,” said an official of one of the creditor banks of Woongjin.
The banks including Shinhan and Woori are to meet with Seoul Central District Court on Monday. Soon after, the court is expected to initialise its management of Woongjin.
Woongjin Holdings and Kukdong Engineering and Construction shocked the markets last month by filing for court receivership. Prior to that, Woongjin had been considered a corporate legend, especially its founder Yoon who molded the company from scratch some 30 years ago.
Industry watchers assessed that an unaffiliated third party would better reflect the demands of the creditors, who would likely want to tighten restructuring on Woongjin by selling off key assets such as Woongjin Coway, the group’s water-purification business, to get their money back.
On Friday, Woongjin’s Yoon delivered a public apology for allowing Woongjin’s waning condition.
“I decided to step down (as co-CEO of Woongjin Holdings) to take responsibility,” he said. Yoon announced his resignation on Thursday.
The Financial Supervisory Service is currently investigating Woongjin and its affiliates to uncover wrongdoing by the management. The prosecution, meanwhile, is expected to start its own probe following the lawsuits filed by Hyundai Swiss.
The local savings bank filed the suit against four Woongjin executives including the founder for failing to pay back a 15 billion won (US$13 billion) debt.
“Woongjin said it would pay back the money by selling off Woongjin Coway,” Hyundai Swiss officials said.
Other creditor banks may follow the savings bank’s example as they found that Woongjin Group had redeemed billions of won in loans borrowed from other Woongjin affiliates. Shortly afterward, Woongjin filed for bankruptcy and thereafter for court receivership.
Another issue to be investigated is why Yoon, his wife and affiliate executives sold off their company stocks just ahead of applying for the receivership, sources in the prosecution said.