Brink of Bankruptcy
The Tongyang Group seems to be dissolving. It means that Tong Yang chairman Hyun Jae-hyun’s dream of a comprehensive financial group is over. Recently, other mid-sized conglomerates such as Woongjin Group and STX Pan Ocean Co. filed for court receivership.
According to industry sources on September 30, Tongyang Group’s three affiliates Tong Yang Inc., Tong Yang Leisure, and Tong Yang International filed for a rehabilitation proceeding so as to avoid defaulting on bonds and commercial paper worth 110 billion won (US$102 million) that matured on the day. Thus, the possibility of raising 1.1 trillion won (US$1.0 billion) for future bonds and commercial paper appears to be slim at the moment.
A Tong Yang associate commented, “We tried very hard to raise money in order to avoid bankruptcy. We made an enormous effort to sell our assets and subsidiaries, but it was difficult to get the right sales price due to the widespread rumor that Tongyang Group is in crisis. So, we reached the conclusion that our group is not likely to survive."
As a result, the prospect of Tongyang’s dissolution appears to be looming large. With its core units collapsing, the sale of its financial arm, Tongyang Securities, is inevitable.
As Tong Yang Leisure and Tong Yang International filed for court receivership, 33.8% of the shares of Tongyang Securities that the two companies retain will be the first going up for sale.
Currently, the group does not have much to offer. The sales value of Tong Yang Inc., Tong Yang Leisure, and Tong Yang International is considered to be low, owing to unattractive characteristics of their business. Tongyang Networks, which is only involved in the group’s work, is not very attractive either, for its sales capacity will be reduced after the group’s break-up. Even with the intentions of the chairman and his family to keep the tech services affiliate by handing over their assets, many think that maintaining the group itself will not be easy.
The sale of Tongyang Power, the group’s key unit, is unavoidable. Its value is estimated to be in the range of 800 billion to 1 trillion won (US$744 billion to US$930 billion). Although several large companies are reported to be interested in the company, none of them are willing to acquire the company right now, on account of the widely-circulating rumor that the Tongyang Group is about to fail.
The last hope is in the cement business, since it has been the group’s backbone from the beginning. For this reason, there is some possibility that Tongyang Cement will be the last company in the group.