Debates Intensifying between KCGI and Hanjin Group

KCGI criticized Hanjin Group chairman Cho Won-tae and he refuted the criticism. The former made an issue of Korean Air’s high debt ratio and hybrid securities issuance and the latter said that KCGI knows nothing about the distinct characteristics of the aviation industry.

KCGI held a press conference in Seoul on Feb. 20 and said, “Hanjin Group owners have been dogmatic and arbitrary, they have caused wrong investments such as the acquisition of Hanjin Shipping, and the CEO has to be responsible for the failed management.” According to KCGI, Hanjin Group’s business conditions began to deteriorate with the acquisition, the group took over the company at that time by taking part in a capital increase of 800 billion won, and its huge borrowings led to a lower credit rating and financial difficulties.

“Hanjin KAL’s cumulative losses amount to 1,741.4 billion won since he took office in 2014 and the losses are snowballing along with Korean Air’s losses,” it mentioned, adding that Korean Air’s debts, debt ratio and annual interest costs respectively amounted to 23,291.7 billion won, 861.9 percent and 546.4 billion won in the third quarter of last year. “The debt ratio skyrockets to 1,618 percent when hybrid securities are regarded as debts,” it pointed out.

Hanjin Group retorted by claiming that Korean Air has continued to grow since the chairman took office in 2017, the company’s sales hit an all-time high in 2018, and its high debt ratio is related to the unique characteristics of the aviation industry.

“The high ratio of Korean Air is because of rising exchange rates and foreign currency translation losses, and we are currently increasing won borrowings and reducing foreign currency borrowings to lower the ratio,” Hanjin Group explained, continuing, “KCGI, which made an issue of our current net profit, has no awareness of the industry in that the profit is no return evaluation criteria for airlines due to their aircraft-based business structures.

In the meantime, Great Holdings, which is an investment purpose company of KCGI, announced on Feb. 20 that its shareholding in Hanjin KAL rose from 32.06 percent to 37.08 percent as a result of 200 share purchase by Great Holdings, 2.23 million share purchase by Daeho Development, and 0.74 million share purchase by Hanyeong Development.