Hyundai Group Sells Anything Salable, Including Its Financial Arm

The Hyundai Group on December 22 made public its corporate restructuring plan, including its withdrawal from the financial industry by means of the disposal of its banking arms and the adjustment of its bulk carrier business. The plan is surprising to many in that the financial subsidiary has been an important pillar of the group, like the other promising assets it decided at this time to give up on. Nevertheless, it is planning to maintain its North Korea-related business down the road. 

The self-help plan can be summarized as ‘sell everything that can make cash.’ Although many securities industry experts predicted the disposal of Hyundai Securities and the Banyan Tree Hotel, they did not expect that the Hyundai group would sell its banking subsidiaries. 

In fact, the disposal of Hyundai Securities is unlikely to bring Hyundai Merchant Marine, the largest shareholder, a large amount of liquidity. Hyundai Merchant Marine owns 54.07 million, or 22.43%, of Hyundai Securities shares, and can obtain approximately 306.7 billion won (US$288.9 million) by selling it. The idea is to get even what little cash it can gain in order to be prepared against potential risks. At the same time, the disposal can be an expression of its strong will to shake itself up. 

The restructuring plan includes recapitalization and personnel reduction measures, too. The group is going to prepare 320 billion won (US$301 million) in cash by means of foreign investment attraction to Hyundai Merchant Marine, a paid-in capital increase on the part of Hyundai Elevator, and initial public offering of Hyundai Logistics, while Hyundai Merchant Marine, Hyundai Asan, and other subsidiaries reduce their manpower. 

North Korea Business Remains Intact 

Still, its business in North Korea remains intact in spite of the intensive restructuring. This is not for any logical business reason, but it has to do with the entire group’s legitimacy for Hyundai. 

Although Hyundai Asan is going through some restructuring and business improvement, the Kaesong Industrial Complex and tourism to Mt. Kumgang will be maintained as before. At present, Hyundai Asan is running some task forces for the resumption of the tourism program. When it comes to the industrial complex, work for the normalization of the business is underway, even amid the political uncertainties following the execution of Jang Seong-taek. The fourth joint committee meeting between Seoul and Pyongyang was held on December 19 to discuss the issue. 

After the restructuring, the group is going to focus on the shipping industry (Hyundai Merchant Marine), transport logistics industry (Hyundai Logistics), industrial machinery sector (Hyundai Elevator), and North Korea business (Hyundai Asan). If the shakeout goes as planned, the group can take a breather. However, many things have to be handled in the remaining subsidiaries until it can take a leap. 

One of the most important tasks is a turnaround in the performance of Hyundai Merchant Marine. Though it is in the middle of intensive restructuring, the global shipping industry must recover before the company can really get back on the right track. Fortunately, the global shipping industry showed at least some recovery this year, giving similar signs for next year as well. 

Hyundai Merchant Marine’s performance is closely linked to that of Hyundai Elevator, because the latter is recording 445 billion won (US$419 million) in losses due to the derivatives transaction associated with the former. Under the circumstances, attention is being paid to how Hyundai Elevator will deal with the maturity of the derivatives starting from next year. 

“We are mulling over extending the derivatives contracts or looking for new financial investors,” said the Hyundai Group, adding, “If we fail to find one, then we have no option but to settle them.” The group is going for a paid-in capital increase early next year but it could go wrong as Schindler Holding AG, the second-largest shareholder, is preparing a new lawsuit. 

Another challenge is the initial public offering of Hyundai Logistics, which is scheduled for next year. The subsidiary, in fact, has prepared an IPO for the past two years, but could not make it due to its sluggish performance and market conditions.