Woobang Damaged by Bank’s Unreasonable DemandsJune 21: failed to pay a matured bill of 1.9 billion won ($1.7 million)
June 22: paid the bill of June 21, but failed to pay a matured bill of 2.9 billion won ($2.6 million)
June 23: paid the bill of June 22 as well as a matured bill of 2.5 billion won ($2.2 million)
June 24: failed to pay a 2.4 billion won ($2.1 million) matured bill
June 26: paid the bill for June 24, as well as a matured bill of 2.7 billion won ($2.4 million)
The above is a week-long example of ＇the war of dishonored bills＇ for Woobang Company, a long-established construction firm now under the corporate workout restructuring process.
Sources from Woobang said that they still break out in a cold sweat when they consider the possibility of a final bankruptcy. Woobang failed to pay bills three times before June 24; the fourth time would have forced them by law to file bankruptcy. The firm, consequently, dodged a lethal bullet when they barely met their June 26 bill.
Why does Woobang have to struggle with this life-or-death crisis again and again, despite the debt rearrangements with the creditors＇ group agreed to under the plan to normalize management?
Woobang affirmed that ＂the company has primary responsibility, but the banks, who agreed to fund the creditors＇ group, did not fulfill their promises and shifted responsibility from one to the other.＂
The creditors＇ group of Woobang initially planed to approve the proposal in which Housing and Commercial Bank (HC&B) collected 100 billion won ($89.3 million) in May, but would provide a new loan of 30 billion won ($26.8 million) on June 22 to keep the company afloat.
When HC&B stipulated, however, that it have first right to collect on the loan in the event of Woobang‘s bankruptcy, the plan struck a snag.
HC&B delivered the stopgap money for Woobang’s unnervingly late, provoking other financial institutions to threaten to sue if Woobang went bankrupt. HC&B ultimately transferred the remainder of the promised financial support, but only after stalling for a week to secure the prior right to collect on the loan.
Sources from HC&B countered that ＂it is standard procedure to request such rights when extending loans to a company which could go bankrupt at any time.＂
Last week, while HC&B was securing priority for repayment for the new loan, Woobang suffered severe financial damage. They lost the trust of customers, and their stock transactions were suspended in the market.
A source from Woobang said, ＂As the bankruptcy rumors spread, customers who hold rights to move into apartments now under construction are declining to pay their remaining balances. 30 to 40 billion won ($26.8 to $35.7 million) is received and deposited at the end of a typical month, but this month’s deposit was less than 10 percent of that average.“
The Woobang crisis serves as an opportunity to realize that the principal intention of the corporate workout restructuring, i.e. ＇to revive the companies and strengthen the banks at the same time＇ could be shaken to its foundations if banks continue to pass the buck.
by Shin Ye-ri