Incheon Airport Corporation: "Nest Hotel Ignored Implementation Agreement Rules... Early Termination Is Appropriate Measure"

Kim Kyung-wook, President of Incheon International Airport Corporation, filed a criminal complaint with the Incheon Metropolitan Police Agency on the 1st against Kim Young-jae, CEO of Sky72, for obstruction of business at the entrance to the Sea Course of Sky72 Golf Course in Yeongjongdo, Incheon. He also announced a statement declaring the suspension of groundwater supply to Sky72. In the background, officials from Sky72 Golf & Resort are seen holding a rally condemning the Incheon International Airport Corporation.
Yeongjongdo ? Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Dongwoo Lee] Incheon International Airport Corporation (IIAC) has rebutted claims that it abused its dominant position by terminating the implementation agreement and unilaterally notifying the demolition of the hotel, as reported by Nest Hotel to the Anti-Corruption and Civil Rights Commission. IIAC stated that the termination of the implementation agreement was an appropriate measure in accordance with the provisions on mid-term termination.

In a statement on the 2nd, IIAC reiterated, "The corporation's notice of termination of the implementation agreement was due to Nest issuing convertible bonds (CB) worth 46 billion KRW twice in January and March last year to a domestic investment purpose company without seeking the corporation's approval as stipulated in the implementation agreement."

Previously, on the 11th of last month, IIAC notified Nest Co., Ltd., which operates the 370-room Nest Hotel located at the southern retention basin of Incheon Airport, of the mid-term termination of the 'Incheon International Airport Southern Retention Basin Phase 2 Development Project Implementation Agreement' signed in December 2011 for hotel development and operation.

The implementation agreement was terminated because Nest issued CBs without obtaining IIAC's approval. The agreement stipulates that if there is a change of 5% or more in shares, consultation or approval from the corporation is required.

IIAC emphasized, "Convertible bonds are bonds that can be converted into the issuing company's shares at the request of the bondholder after a certain period, despite being issued as bonds," adding, "When exercising the stock conversion rights, there is absolutely no room for opinions from the bond issuer or third parties."

Simply issuing convertible bonds does not affect the validity of conversion even if the corporation does not approve the conversion at the time the bondholder exercises the conversion rights. IIAC explained that this ultimately infringes on the corporation's approval rights regarding changes of 5% or more in the representative investor's shares as stipulated in the implementation agreement.

The corporation added that unless Nest takes substantive measures such as converting the convertible bonds into general bonds unrelated to shares, or the bondholder pledges not to exercise the stock conversion rights or to exercise them only after obtaining the corporation's approval, the corporation's approval rights would become meaningless.

IIAC stated, "Despite the provisions in the implementation agreement, it was confirmed last November that Nest, which had a capital of 6 billion KRW at the time of bond issuance, issued convertible bonds amounting to 7.7 times that amount without any notification to the corporation," and "We repeatedly requested that the infringement of the corporation's approval rights for share changes be remedied by the end of April this year, but neither Nest nor the convertible bondholders submitted any documents."

An official from the corporation said, "Since Nest did not take any legally valid measures, the corporation notified the mid-term termination of the agreement in accordance with the provisions of the implementation agreement."

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