STX Group Chairman Kang Duck-soo is under mounting pressure to pay some of the debts held by the struggling units of the country’s 19th largest conglomerate using his own assets

2013-05-16

STX boss pressured to give up private assets

By Na Jeong-ju

STX Group Chairman Kang Duck-soo is under mounting pressure to pay some of the debts held by the struggling units of the country’s 19th largest conglomerate using his own assets. Government officials and creditor banks say the 63-year-old executive should give up a considerable part of his fortune to take responsibility for the ongoing liquidity crisis in STX. “That’s a pre-condition for a financial lifeline. All creditor banks and the government want him to join their rescue efforts,” said an official from the Financial Supervisory Service (FSS). “They will take extreme measures, including requesting the court to seize his property, if needed.” Kang recently handed over his controlling stake in STX Offshore & Shipbuilding, which generates more than 50 percent of the group’s total revenue, to creditors. He is also considering selling the group’s overseas assets to secure cash. However, creditor banks claim that’s far from being enough to get STX out of its financial hole. Some bank officials told media Kang should pay the price for mismanaging the firm. They alleged that some of Kang’s relatives are working in key positions at STX affiliates, indicating he abused his status and power to give them jobs. In an email to STX employees last week, Kang said he will do whatever it takes to save the firm.
“I’m ready to give up all my shares in STX, if that’s necessary to resolve this crisis,” he said. “I’ll do my best to protect your jobs based on close cooperation with creditors and the government.”

STX officials say the main cause of liquidity problems is a long slump in the shipbuilding and construction industries, in which STX is heavily involved.

Early this week, creditor banks agreed to inject some 300 billion won ($270 million) to help the firm repay maturing debts and cover operating costs. They are also moving to provide an additional 190 billion won to STX Heavy Industries and STX Engine.

As of the end of March, creditors held the firm’s debts totaling 13.2 trillion won ($12.1 billion). The Korea Development Bank (KDB), the Export-Import Bank of Korea (Korea Eximbank), Nonghyup Bank and other creditors loaned a total of 5.2 trillion won to STX. They also provided payment guarantees worth 7.1 trillion won and were holding 771 billion won worth of corporate bonds issued by the firm.

The banks said they decided to rescue STX because a default could create ripple effects throughout the whole national economy.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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