Won-Tae Cho, de facto president of an airline of a public company, not president of Hanjin

[데일리동방] Korea Development Bank is expected to secure a 16% stake in Hanjin Kal to control the management of a large airline. Hanjin Cho Won-tae group president is actually just the president of a public airline. In addition, the Bank of Korea, which failed to restructure Asiana Airlines, is taking on responsibility for private companies. In this process, it is emphasized that it is an unusual operation that ordinary investors have to bear the damage.

According to the investment banking industry (IB) on the 19th, Hanjin Kal, the holding company of the Hanjin group, is conducting a paid capital increase (500 billion won) assigned to the Industrial Bank to a third party. Foreign exchange bonds (EB, 300 billion won) are also issued to guarantee a total amount of 800 billion won.

The funds will first be loaned to Korean Air and then compensated by receiving new shares through a paid-up capital increase (2.5 trillion won, 730 billion won investment by Hanjin Kal). Korean Air will invest 1.5 trillion won of the funds guaranteed through the bequest to Asiana Airlines and will support the 300 billion won through the acquisition of permanent convertible bonds (CB).

Upon completion of all transactions, KDB secures a 16.2% stake in Hanjin Kal and strengthens management of the Hanjin group. Han Jin Kal appoints external directors, etc. Appointed by KDB and signed an investment agreement containing provisions that require KDB’s consent when making important management decisions. If this is violated, a fine of 500 billion won and liability for damages should be borne.

There are two main reasons why it is pointed out that the structure of the transaction is unfair. The fact is that the Bank of Korea actually controls the management of the Hanjin group with a small stake, and that it is a form of handing over the failed restructuring of Asiana Airlines to private companies.

The bigger problem is that Cho Won-tae, president of the Hanjin group, accepted the deal. Under the management of creditors such as the Bank of Korea, the “large airline” is practically nationalized. President Cho has assumed the position of president of a public airline.

President Cho is on the defensive in the dispute over management rights with the tripartite shareholders’ association (KCGI, Bando E&C, former vice president of Korean Air Cho Hyun-ah). If Saneun secures a stake and emerges as a friendly force, he will be able to protect the management rights, but the actual management and staff will be handed over to Saneun.

According to Hanjin Kal’s statute, there is only one case where a third party bequest can be made for KDB. It is important that the current situation is “urgent”. Hanjin Kal maintains a good financial position and Korean Air is in a hurry. While stressing this, KCGI also expressed its position that if Hanjin Kal needed the funds, he would directly participate in the bequest.

Regarding the assignment to third parties, the KDB emphasizes “the transparency of the governance structure”, stating that it is a measure to establish a monitoring system for the Hanjin group. The governance structure means corporate decision making and its core is the board of directors. The board of directors is responsible for monitoring decisions made by management that violate the interests of shareholders. However, currently, Chairman of the Board Han Jin-Kal is known to have played a decisive role in this transaction as external director Kim Seok-dong, former chairman of the Financial Services Commission. President Kim is a high school classmate with President Lee Dong-geol and San-eun. There is growing concern that Gwanpia-led “government management” could hurt shareholder value. It is emphasized that governance transparency did not exist from the beginning.

In addition to Hanjin Kal, Daehan Hankuk’s general minority shareholders are also significant. To bail out Asiana Airlines through a large-scale bequest of 2.5 trillion won, it means the Bank of Korea is handing over the failed Asiana Airlines restructuring to private companies and general shareholders.

An IB industry official said, “After Kim Seok-dong was appointed chairman of the board earlier this year, it was noted that the pace of reorganization of the domestic aviation industry will increase.” She said. He said: “The scenario for the integration of Korean Air and Asiana Airlines has been discussed since last year. Of course, Korean Air shareholders are also facing a tough reaction, so legal issues will continue to be discussed. “