Tongyang to sell core unit Tongyang Power to repay debt for survival

2013-09-24 17:45

Tongyang to sell core unit for survival

FSS monitors ‘fund run’ out of securities arm

By Na Jeong-ju
Tongyang Group said Tuesday that it is willing to sell one of its core affiliates, Tongyang Power, in order to secure funds for debt repayment.
On the same day, the wife of the late Tongyang founder, Lee Yang-ku, said she will transfer her stake in Orion Group, an offshoot of Tongyang, to Tongyang Networks, to help relieve its cash shortage problem. The stake is worth about 150 billion won, according to the group.
These plans, if implemented successfully, could help the country’s 47th conglomerate avoid immediate bankruptcy, analysts said.Tongyang officials said the firm will be able to secure 300 to 500 billion won through the sale of Tongyang Power, an energy firm that constructs and operates power plants.
Another core subsidiary, Tongyang Magic, that specializes in producing kitchen appliances is valued at some 110 billion won, and has already been put up for auction. The group’s Chairman Hyun Jae-hyun also pledged to sell his own assets to tide over the liquidity crisis.
“We are taking all possible measures to survive,” said Bae Jin-won, a group spokesman. “However, we can’t survive without support from creditors and the financial authorities. We need their help.”
According to brokerage firms, a total of some 1.13 trillion won ($1.04 billion) worth of bonds and corporate bills issued by Tongyang’s affiliates are scheduled to mature this year.
Tongyang hopes it can raise some 800 billion won by selling its core assets. However, the liquidity problem could make it difficult to find new owners, and even if it does, the firms may have to be sold at bargain prices.
As the firm is heading deeper into trouble, retail investors have withdrawn funds from Tongyang’s brokerage unit, Tongyang Securities.
The Financial Supervisory Service (FSS) said it is monitoring the “fund run” on Tongyang as part of efforts to protect retail investors who may suffer in the event of a bankruptcy.
“Retail investors who have deposited money in Tongyang’s cash management accounts don’t have to worry about losing money because the government provides payment guarantees for this,” said an FSS official. “However, we can’t protect those who have invested in stocks or derivatives through Tongyang’s securities accounts.”
Banks are reluctant to provide bailout funds to Tongyang.
The group recently asked the state-run Korea Development Bank (KDB) to provide payment guarantees for its securities so that it can issue securities backed by assets held by its affiliates. However, the bank rejected this out of concerns of a possible default. Sources said that Tongyang might raise up to 1 trillion won by selling asset-backed securities.
Last week, Tongyang asked Orion Group to provide financial support. However, the group rejected this request, Monday out of worries that it could be dragged into the financial mess. Orion is headed by Tam Cheol-gon, Hyun’s brother-in-law. The wives of Hyun and Tam are daughters of the late Tongyang founder.
Tongyang Inc., the de facto holding company of the group, saw its debt-to-equity ratio reach 650.6 percent at the end of June.

FSS says Tongyang Securities is safe

Sept 25,2013

While retail investors agonize over whether their assets at Tongyang Securities are threatened by ongoing liquidity woes at Tongyang Group, a senior official at the country’s financial regulator said yesterday, “There is no need to worry.”
Kim Gun-sop, senior deputy governor at the Financial Supervisory Service, said yesterday: “Even though the liquidity crisis of Tongyang Group worsens, there will be no problem for Tongyang Group to protect its customer assets. We have inspected the overall asset soundness of Tongyang Securities and were able to confirm that customer deposits and investment funds for financial products are managed separately from company assets and are secured safely.”
Kim’s comments were made in a briefing meant to ease investors’ jitters yesterday at FSS headquarters in Yeouido, western Seoul. According to industry sources, Tongyang Securities has received many calls this week from customers who invested in stocks, bonds and funds managed by the securities firm. They wanted to know if they should close their cash management accounts (CMAs) and equity-linked securities (ELS) accounts and pull out their investments.
The company even added a pop-up on its Web site to inform customers that their customer assets, including deposits, bonds and funds, are kept in other public institutions and private financial companies like the Korea Securities Depository and the Korea Securities Finance Corporation. According to the FSS, a total of 49,000 investors have invested in corporate bonds and commercial paper of Tongyang affiliates through Tongyang Securities, and most of them are retail investors. Because of its low credit, the financial investments offered a high annual yield of up to 7.9 percent compared to the average deposit interest rate of 2.75 percent.
Concerns among investors deepened following alarming reports Monday that Tongyang Group, the country’s 38th-largest conglomerate by assets, failed to receive support from its corporate cousin, the Orion Group. Before this year ends, Tongyang Group needs to pay back more than 1.3 trillion won ($1.2 billion) worth of maturing debts, including 310 billion won worth of corporate bonds, 730 billion won worth of commercial paper and 300 billion won worth of short-term loans. Next month alone it needs to find 420 billion won worth of funds to pay back debt.
Previously, the conglomerate was able to pay back debts by selling corporate bonds and commercial papers through its affiliate, Tongyang Securities. However, that will no longer be possible following measures that were announced by the Financial Services Commission in July to normalize the frozen corporate bond market and to prevent low credit quality and high-risk corporate bonds from being traded in the market.
The measures include prohibiting junk-credit rated corporate bonds from being sold by a company through its securities affiliate from next month, which means that Tongyang Group will no longer be allowed to secure funding through Tongyang Securities.
The financial regulator said earlier that Tongyang Group affiliates’ corporate bonds and commercial papers are unqualified in terms of credit ratings to be sold through its securities affiliate.
With the FSS making it clear yesterday that the looming credit crunch of the conglomerate will not affect customer assets managed by its securities arm, shares of Tongyang Securities jumped 2.04 percent yesterday to close at 2,745 won. On Monday, its shares declined more than 14 percent along with other affiliates whose share prices plunged following an announcement by Orion Group that it has no intention to financially aid Tongyang Group now or in the future.
Tongyang Group had reportedly asked Orion Group to provide 14.49 percent of Orion Group shares owned by its Vice Chairman Lee Hwa-kyung as security so that it could issue more asset-backed securities (ABS) but that request was rejected Monday. Issuing ABS would help the conglomerate secure up to 1 trillion won worth of funding to pay back its maturing debt.

2013-09-24 11:27

Tong Yang Group struggling to survive

Embattled Tong Yang Group, the country’s 38th-largest conglomerate, would need 800 billion won (US$745 million) to tide over the current cash shortage and normalize its business, a local credit appraiser said Tuesday.
The outlook came as the group has been suffering from cash shortages due to a slowdown in its building and service businesses, and it needs to cover debts worth 1.1 trillion won due to mature within this year.
“Tong Yang Group needs at least 700 to 800 billion won to deal with the crisis,” said Ahn Young-bok, an official from NICE Investors Service Co.
“It must place top priority on settling maturing debts of Tong Yang Leisure Co. and Dongyang International, as financial troubles in such semi-holding firms can have an adverse impact on the group as a whole,” Ahn added.
Tongyang Inc., a de facto holding company of the group, saw its debt-to-equity ratio reach 650.6 percent at end-June, and its affiliates Tong Yang Leisure and Dongyang International landed on a cash-crunch as of end-August.
Meanwhile, the group’s creditor banks are showing signs of reluctance in offering financial support, with some of them saying it has never considered helping the company.
Creditors’ reluctance comes after Orion Corp., a major confectionery maker, refused to provide loan guarantee for some fresh bonds Tong Yang will sell in a bid to refinance its debts.
Tong Yang Group was created in the 1970s as a cement manufacturer by late founder Lee Yang-gu, before growing into a conglomerate with 31 affiliates under its wing. Orion was part of Tong Yang Group until it split from its parent firm in 2001. (Yonhap)

FSS says Tongyang Securities is safe

Sept 25,2013

While retail investors agonize over whether their assets at Tongyang Securities are threatened by ongoing liquidity woes at Tongyang Group, a senior official at the country’s financial regulator said yesterday, “There is no need to worry.”
Kim Gun-sop, senior deputy governor at the Financial Supervisory Service, said yesterday: “Even though the liquidity crisis of Tongyang Group worsens, there will be no problem for Tongyang Group to protect its customer assets. We have inspected the overall asset soundness of Tongyang Securities and were able to confirm that customer deposits and investment funds for financial products are managed separately from company assets and are secured safely.”
Kim’s comments were made in a briefing meant to ease investors’ jitters yesterday at FSS headquarters in Yeouido, western Seoul. According to industry sources, Tongyang Securities has received many calls this week from customers who invested in stocks, bonds and funds managed by the securities firm. They wanted to know if they should close their cash management accounts (CMAs) and equity-linked securities (ELS) accounts and pull out their investments.
The company even added a pop-up on its Web site to inform customers that their customer assets, including deposits, bonds and funds, are kept in other public institutions and private financial companies like the Korea Securities Depository and the Korea Securities Finance Corporation. According to the FSS, a total of 49,000 investors have invested in corporate bonds and commercial paper of Tongyang affiliates through Tongyang Securities, and most of them are retail investors. Because of its low credit, the financial investments offered a high annual yield of up to 7.9 percent compared to the average deposit interest rate of 2.75 percent.
Concerns among investors deepened following alarming reports Monday that Tongyang Group, the country’s 38th-largest conglomerate by assets, failed to receive support from its corporate cousin, the Orion Group. Before this year ends, Tongyang Group needs to pay back more than 1.3 trillion won ($1.2 billion) worth of maturing debts, including 310 billion won worth of corporate bonds, 730 billion won worth of commercial paper and 300 billion won worth of short-term loans. Next month alone it needs to find 420 billion won worth of funds to pay back debt.
Previously, the conglomerate was able to pay back debts by selling corporate bonds and commercial papers through its affiliate, Tongyang Securities. However, that will no longer be possible following measures that were announced by the Financial Services Commission in July to normalize the frozen corporate bond market and to prevent low credit quality and high-risk corporate bonds from being traded in the market.
The measures include prohibiting junk-credit rated corporate bonds from being sold by a company through its securities affiliate from next month, which means that Tongyang Group will no longer be allowed to secure funding through Tongyang Securities.
The financial regulator said earlier that Tongyang Group affiliates’ corporate bonds and commercial papers are unqualified in terms of credit ratings to be sold through its securities affiliate.
With the FSS making it clear yesterday that the looming credit crunch of the conglomerate will not affect customer assets managed by its securities arm, shares of Tongyang Securities jumped 2.04 percent yesterday to close at 2,745 won. On Monday, its shares declined more than 14 percent along with other affiliates whose share prices plunged following an announcement by Orion Group that it has no intention to financially aid Tongyang Group now or in the future.
Tongyang Group had reportedly asked Orion Group to provide 14.49 percent of Orion Group shares owned by its Vice Chairman Lee Hwa-kyung as security so that it could issue more asset-backed securities (ABS) but that request was rejected Monday. Issuing ABS would help the conglomerate secure up to 1 trillion won worth of funding to pay back its maturing debt.