“Timf Next Year First Half M&A Outlook” - Attorney Choi Hyo-jong Participating in Rehabilitation Procedure Association

Published 04 Sep.2024 14:20(KST)

“Urgent Matter: Halting Autonomous Restructuring”

Tmon and Wemakeprice, which caused large-scale settlement and refund delays, have decided not to extend the ‘Autonomous Restructuring Support (ARS)’ procedure. Choi Hyo-jong (50, Judicial Research and Training Institute class 34), a lawyer at Law Firm Lin and the sole creditor-side attorney participating in the rehabilitation procedure council, stated, “At this point, halting the ARS procedure is necessary and urgent,” adding, “Unless there is a special unexpected event, the rehabilitation procedure will commence, and I believe the merger and acquisition will be completed by the first half of next year.”

[Image source=Beomryul Newspaper]

Attorney Choi said that the ARS procedure was a necessary step. He explained, “Although the possibility was small, it was acceptable to try ARS once for a month in the first stage for greater benefits,” and “ARS failed due to difficulties in attracting external investment, but as time passes, the likelihood of ARS success decreases, so it is time to proceed to the rehabilitation procedure commencement followed by mergers and acquisitions, which have higher chances.”

Choi cited the biggest reason for stopping ARS as the ‘concern over a chain bankruptcy.’ Following the Tmon and Wemakeprice incident, related companies such as Interpark Commerce, Happymoney, and Table & Joy also filed for rehabilitation at the Seoul Bankruptcy Court. He said, “Initially, chain bankruptcies were not anticipated, and although the Tmon CEO hoped to extend ARS, the court rejected it due to concerns over chain bankruptcies.” He continued, “If ARS were extended, a massive bankruptcy could severely damage the entire e-commerce market,” adding, “This point was emphasized in the council, and I said, ‘It is a path no one wants to take, but sometimes it is inevitable, and now is that time.’ Many attendees agreed.”

Currently, one private equity fund has submitted a confidential Letter of Intent (LOI) for Tmon, conditional on the commencement of rehabilitation proceedings. Attorney Choi expects more bidders to emerge during the M&A phase after the formal rehabilitation procedure begins. However, he emphasized the need for investors who can continuously invest and have a solid financial structure, not just those who complete the payment of the acquisition price. He said, “The debt amount must be assumed as is, and since the investor must take on 1.3 trillion won in debt, the process must be tailored to the acquirer, making the M&A through the rehabilitation procedure necessary.” He added, “It is clearly necessary for the country that Korea’s e-commerce market has healthy competitive companies, not just monopolies like Coupang and Naver Shopping.”

Attorney Choi forecasted that the M&A would be completed by the first half of next year after the rehabilitation procedure begins. He was optimistic that it would proceed smoothly thanks to the Seoul Bankruptcy Court’s successful track record and expertise in rehabilitation procedures. He said, “There appear to be no legal grounds to dismiss the commencement of rehabilitation, so shortly after the decision, M&A will proceed as a stalking horse (a method where a prospective buyer signs a preliminary contract and then a public competitive bidding is conducted) before approval, and it can be completed by the first half of next year,” emphasizing, “Since Tmon is the first case among the current series of incidents, it must succeed unconditionally.” He added, “The fact that the second council meeting was held just two weeks after the first shows the court’s determination,” and explained, “Since the Seoul Bankruptcy Court has successfully handled many rehabilitation M&As, it will proceed well.”

Choi, an expert in insolvency law, has handled numerous corporate rehabilitation and bankruptcy advisory and litigation cases involving Ssangyong Motor, Dongyang Group, Woongjin Group, Hanjin Shipping, and others. In 2022, he served as an external research member of the Seoul Bankruptcy Court’s ARS system improvement task force and currently serves as a corporate bankruptcy trustee at the Seoul Bankruptcy Court.