A Painful Decision to Stave off Financial Risks
Woongjin Group will resell water purifier business Coway in just three months after it re-acquired the lucrative firm in six years. The painful decision is intended to stave off financial risks as the group’s solar cell manufacturer Woongjin Energy suddenly entered into court receivership.
The group announced on June 26 that it has decided to resell its water purification unit Woongjin Coway Co. which it acquired from MBK Partners, a Seoul-based private equity firm, on March 21. It has chosen Korea Investment & Securities Co. as a manager of the re-sale. Woongjin Group purchased a 22.17 percent stake in Woongjin Coway from MBK Partners for 1.68 trillion won (US$1.46 billion). It later bought an additional stake for 300 billion won (US$259.40 million) to stabilize its control of the company.
The group has made the resale decision because it has failed to repay loans as planned due to the credit rating downgrade of its holding company. Previously, major credit rating companies in South Korea said that the financial problems of Woongjin Energy that had recently been put under court receivership could spill over to the holding firm. They have recently downgraded the credit rating of Woongjin Group from BBB+ to BBB- as the group’s key affiliate Woongjin Thinkbig Co. became heavily indebted in the process of acquiring Woongjin Coway.
As a result, the group is expected to have difficulties in dealing with 130 billion won (US$112.41 million) worth of loan to be matured in August. In particular, it is mired in a crisis partially due to the fact that investor sentiment of the BBB- bond market has rapidly frozen in the aftermath of the Asiana Airlines crisis.