Just caught a breather... Will the Hanjin Kal management dispute reignite?

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Hanjin Group, which caught a breather from the crisis caused by the novel coronavirus infection (COVID-19) thanks to government financial support, is now facing signs of a rekindled management rights dispute. For Chairman Cho Won-tae of Hanjin Group, the situation remains one challenge after another.

According to industry sources on the 27th, a specific investor from another corporation purchased 1,225,880 shares (about 2%) of Hanjin KAL during the trading session. The securities industry estimates that this investor is Bando Construction, a member of the "Shareholder Alliance for Hanjin Group Normalization (the 3-party alliance)." The 3-party alliance consists of former Korean Air Vice President Cho Hyun-ah, private equity fund (PEF) KCGI, and Bando Construction. In this case, the 3-party alliance's stake would increase from the previous 42.75% to around 44.75%. This is 3.6 percentage points more than the 41.15% friendly shares secured by Chairman Cho's side.

With signs of a resurgence in the management rights dispute, Chairman Cho is now caught in a "double hardship" of overcoming the COVID-19 crisis and defending his management rights. On the same day, Chairman Cho was able to catch a breather from immediate liquidity issues as KDB Industrial Bank and Korea Eximbank approved a support plan worth 1.2 trillion won. Korean Air also disclosed a borrowing of 200 billion won for operating funds. However, the industry expects that additional support requests will be inevitable as the COVID-19 situation prolongs.

In fact, Korean Air has about 3.8 trillion won in borrowings to repay within the year. Fixed monthly costs also reach between 400 billion and 500 billion won. The 2.2 trillion won to be secured through a rights offering and support from KDB and Eximbank, along with cash inflows from asset sales, are insufficient to resolve the situation.

At the same time, preparations must be made for the management rights dispute with the 3-party alliance. Industry insiders speculate that after July, the 3-party alliance may request an extraordinary shareholders' meeting and attempt to enter the board of directors. Although Chairman Cho won a narrow victory at the shareholders' meeting last March, the 3-party alliance has steadily increased its stake, making the outcome uncertain at present. A business community official said, "Although they said they would not engage in a wasteful share competition, Chairman Cho's side also needs a clever strategy."

This content was produced with the assistance of AI translation services.