Chairman Dong-geol Lee: "KDB Will Convert HMM CB"...Harsh Words for Ssangyong Motor (Summary)

"HMM Convertible Bonds, Profit is Obvious if Converted... Not Converting is Breach of Duty"
"Ssangyong Motor Tried Hard but... Cannot Judge Business Normalization by Self-Rescue Plan Alone"

[Asia Economy Reporter Park Sun-mi] KDB Industrial Bank has clearly stated its intention to convert the convertible bonds (CB) of HMM (formerly Hyundai Merchant Marine), which are due on the 30th, into shares. Regarding Ssangyong Motor, where labor and management have reached a final agreement on a self-rescue plan centered on two years of unpaid leave, the bank expressed that financial support is not possible at this stage.

On the 14th, Lee Dong-geol, Chairman of Industrial Bank, said at a press briefing on key issues including HMM and Ssangyong Motor, "The conversion price is 5,000 won, but the current HMM stock price is around 46,000 won," adding, "Converting would obviously be profitable." He added, "If there is an opportunity to make a profit, giving it up would constitute breach of trust. We cannot not convert."

Due to service and cost improvements and route restructuring, HMM announced its best-ever first-quarter performance, which has significantly boosted HMM’s stock price. The bank must decide whether to convert HMM CB into shares by the 29th. As of the closing price on that day, HMM’s stock price is about 46,250 won, and converting the CB into shares and selling them could yield profits exceeding 2 trillion won.

Chairman Lee emphasized, "We will naturally convert the CB into shares," adding, "The money earned this way will later become policy finance resources for the Industrial Bank." However, regarding the potential aftershock of a stock price drop following the CB conversion, he said, "The current stock price already factors in the assumption that the bank will convert the CB into shares in the future."

While announcing plans to convert HMM CB into shares, Lee refrained from commenting on rumors of HMM’s sale. He said, "The sale plan should be pursued step-by-step, considering other factors," and "We will review it with a bit more time." Regarding HMM’s privatization, he dismissed it as "no progress has been made," but added, "We will keep the possibility open and consider various factors."

What is the evaluation of Ssangyong Motor’s self-rescue plan?

Regarding the final agreement between labor and management at Ssangyong Motor, which is undergoing corporate rehabilitation procedures, on a self-rescue plan centered on two years of unpaid leave, he praised their efforts, saying "They worked hard." However, the Industrial Bank also expressed that financial support is impossible based on this alone.

Chairman Lee reiterated the existing principle that "Ssangyong Motor must attract investors with management capabilities and present a sustainable business plan for financial support to be possible," and said, "Although this self-rescue plan has fixed cost reduction effects, it alone is insufficient to judge Ssangyong Motor’s business normalization, so at this time, the bank has no position on financial support."

He added, "Without a sustainable business plan for Ssangyong Motor, no one can save the company, and it is not easy to support a company that no one can save," and evaluated, "We need to carefully consider whether the efforts of Ssangyong Motor’s labor and management are sufficient. I understand their efforts such as two years of unpaid leave, but I can only say it is a step forward."

Furthermore, he explained, "The self-rescue plan created by Ssangyong Motor’s labor and management will be included in the rehabilitation plan and evaluated by potential acquisition candidates," and "Ssangyong Motor’s labor and management should be viewed from the perspective of how they have persuaded investors, not from the perspective of the bank or government."

Regarding candidates who could become the new owners of Ssangyong Motor, he said, "I strongly hope that responsible and capable entities will participate in the M&A and submit sustainable business plans," but added, "Currently, sincere acquisition candidates are very rare. Much effort will be needed."

"Will meet major shareholders of Hanjin KAL"

Amid delays in the integration process of Korean Air and Asiana Airlines, Chairman Lee announced plans to meet major shareholders of Hanjin KAL. Regarding Korean Air’s post-acquisition integration strategy (PMI) for Asiana Airlines, he said, "To secure competitiveness, we plan to integrate the three low-cost carriers (LCCs)," adding, "The timing of integration will be discussed with the company, considering the resolution of the COVID-19 crisis and operational efficiency. It will not be too late."

He also said that it is desirable for all shareholders to cooperate in monitoring and supervisory evaluations of the company unless there is an unnecessary management dispute, and "To this end, we plan to meet not only Hanjin KAL but also major shareholders going forward."

He expressed confidence in Chairman Cho Won-tae’s management leadership and the successful merger of Korean Air and Asiana Airlines under his leadership, but added, "However, in an emergency, other major shareholders of Korean Air may exercise management rights. I think it is appropriate to impose the same binding conditions on all shareholders to restrain Chairman Cho Won-tae’s side. We plan to meet those holding certain shares who have been involved in management disputes, such as KCGI (Kang Sung-bu Fund), former Korean Air Vice President Cho Hyun-ah, and Bando Construction."

Meanwhile, regarding the Daewoo Construction sale issue, he said, "KDB Investment holds 50.75% of Daewoo Construction’s shares as the major shareholder," and "Since KDB Investment holds management rights and major decision-making authority of Daewoo Construction, the Industrial Bank cannot directly intervene in operations. Future sale procedures will proceed according to KDB Investment’s independent decisions." Regarding investment rumors in Viva Republica (Toss), the parent company of Toss Bank, he stated, "We will invest 100 billion won."

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