"Rehabilitation of Dong Sung Pharm Requires Stakeholder 'Acceptance'... Legitimacy Should Be the Standard for Assessment"

Regarding the criteria for assessing the rehabilitation plan for Dong Sung Pharm, its largest shareholder, Brand Refactoring, stated that the core issue in this case is not simply whether the plan is approved, but rather the legitimacy and feasibility of the rehabilitation proposal.

On March 18, Brand Refactoring explained, "The essence of today's creditors' meeting is not a vote for or against, but rather to determine whether the rehabilitation plan is legally and structurally sound."

According to the public information, the Dong Sung Pharm rehabilitation plan is structured around a consortium led by UAMCO and Taekwang Industrial, with a total scale of KRW 160 billion. Specifically, it consists of a KRW 70 billion paid-in capital increase, KRW 50 billion in convertible bonds (CB), and KRW 40 billion in corporate bonds.

Brand Refactoring stated, "What is more important than the total amount is the structure," and explained, "KRW 90 billion is composed of debt-type funds, and the plan can be interpreted as including elements such as equity dilution, collateral restructuring, and the possibility of future changes in control."

Issues of trust surrounding the rehabilitation process were also raised. Brand Refactoring said, "According to company disclosures and media reports, approximately KRW 17.7 billion in embezzlement and breach of trust occurred last year, and former executives including the ex-CEO have been sued," adding, "The fact that individuals involved in this matter are currently participating in the rehabilitation process as co-managers is something the court may need to consider."

They continued, "In such cases, the court should look beyond the mere progress of the process and also consider the credibility of the management and the fairness of the proceedings."

Brand Refactoring also specifically addressed the criteria for assessing the rehabilitation plan, stating, "Under the Debtor Rehabilitation and Bankruptcy Act, approval of the rehabilitation plan must satisfy requirements of legality, fairness, equity, feasibility, and preservation of liquidation value," and added, "It is not a structure where approval is determined solely by the consent of secured creditors."

Regarding the actions of minority shareholders, Brand Refactoring said, "Recently, some minority shareholders have been demanding verification of the entire rehabilitation and acquisition structure through demonstrations in front of the Financial Supervisory Service," and explained, "In particular, when the KRW 70 billion capital increase and KRW 50 billion CB are combined, the possibility of equity dilution for existing shareholders has been raised."

They added, "Even if there is no formal capital reduction, whether there is a substantial change in equity value needs to be reviewed separately."

Brand Refactoring also commented on the procedures after the rehabilitation plan is approved, stating, "The company is taking the position that it will pursue the resumption of trading after the creditors' meeting, but whether trading will actually resume will be determined by a separate review by the Korea Exchange after the improvement period ends."

They went on to say, "Approval at the creditors' meeting does not automatically lead to continued listing or recovery of shareholder value."

Brand Refactoring emphasized, "What the court needs to examine in this case is not the amount of capital or the outcome of the vote, but whether the plan is structured in a way that actually enables the normalization of the company," and added, "A comprehensive judgment must be made regarding the protection of stakeholders' rights and the sustainability of the financial structure."

They further stated, "The rehabilitation process should be judged not simply on whether it passes, but based on structural legitimacy and plausibility."

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