Global Samsung Faces Risk of Losing 'Global' Status... Growing Concerns Over Judicial Risks and Business Disruptions

Lee Jae-yong's 'Week of Destiny'... Tense Anticipation for Investigation Review Committee Decision in Four Days
If Judicial Risks Prolong, Bio Industry and Overseas Orders Including Samsung BioLogics and Samsung C&T Face Setbacks
Chairman's Led Global Business and Networking Paralyzed

[Asia Economy Reporter Kim Hyewon] "The hands and feet of 'SAMSUNG,' a global company representing Korea, are tied. Ironically, it is overseas companies that are waiting for the resolution of judicial risks of essential business partners."

As the validity of the indictment against Samsung Electronics Vice Chairman Lee Jae-yong will be decided at the Prosecutor's Investigation Deliberation Committee meeting on the 26th, voices within and outside Samsung Group express concerns about the decline in brand status as a global company and the resulting domestic and international business disruptions. If Vice Chairman Lee is indicted again after 40 months on charges including violation of the Capital Markets Act (fraudulent trading and market manipulation) and stands trial, it is expected that the domestic bio industry and overseas construction projects will be primarily affected.

According to the business community on the 22nd, the external credibility of Samsung BioLogics and Samsung C&T, major affiliates of Samsung Group and subjects of the current prosecution investigation, has declined, negatively impacting additional fundraising and overseas project orders.

Samsung BioLogics requires more than 3 trillion won in funding from this year through 2023 for the expansion of its 4th plant. Even if Samsung BioLogics generates profits during this period, about 1 trillion won will inevitably need to be raised externally. The problem is that if the prosecution indicts, the ability to mobilize funds will sharply decline due to credit rating downgrades. To conduct a paid-in capital increase or public bond issuance, submission of a securities registration statement to the Financial Supervisory Service is mandatory, and if accounting issues resurface due to prosecution indictments, related uncertainties will inevitably increase.

Moreover, if the credit rating falls, conditions for bank loans and private bond issuance also become unfavorable. In fact, regardless of Samsung BioLogics' improved performance, credit rating agencies have downgraded its credit rating solely due to accounting treatment suspicions. KDB Industrial Bank notified the refusal to extend loan maturities after accounting problems arose, and general commercial banks may reduce credit limits or raise interest rates. An industry insider said, "The government has selected 'bio' as one of the next-generation key growth industries and is focusing on nurturing it, but the judicial risks surrounding Samsung BioLogics could hamper national policy directions."

Major overseas order projects are also in emergency. Generally, in overseas social overhead capital (SOC) projects, it is industry practice to require companies or management to disclose litigation history as a bidding condition.

Samsung C&T is currently pursuing projects such as the 9 trillion won Saudi Arabia Qiddiya mixed entertainment development project and the 500 trillion won NEOM smart city development project. Last year, Vice Chairman Lee personally engaged in business in the Middle East, regarded as a "land of opportunity," meeting Abu Dhabi Crown Prince Mohammed bin Zayed in the UAE and meeting Saudi Crown Prince Mohammed bin Salman twice within three months.

If Vice Chairman Lee is indicted in this case, the trial is expected to take at least an additional three years, making the judicial risks surrounding Samsung longer and more complex. Once the trial begins, not only Vice Chairman Lee but many executives and employees will have to attend court, and focusing on preparation work will inevitably hinder decisions on important issues and overseas negotiations.

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