STX sell-off will weaken Kang’s holdWoori Bank has decided to sell off its holdings of 653,000 shares of shipbuilder STX Group that Kang Duk-soo, the STX chairman, used as collateral in return for borrowing loans for its IT services affiliate STX ForceTec, weakening Kang’s controlling power of the nation’s 13th-largest conglomerate.
According to industry insiders yesterday, Woori Bank notified Korea Development Bank of its intention to sell its STX Group shares. KDB is the main creditor overseeing a voluntary restructuring plan sought by shipbuilder STX Group.
Woori wants to recoup the conglomerates’ loans as soon as possible before the shipbuilder’s stock price falls further. Its declining stock price has already lowered the collateral value.
The share price of STX Group plunged to 2,560 won ($2.26) on Friday. Earlier this year, it retained an 8,000 won level.
Market observers said Woori’s sale of STX Group shares will deal a severe blow to Kang’s controlling power as the move will leave him with fewer shares.
This will cause a disintegration of STX Group and its affiliates, they forecast.
Of the 60.5 million shares issued by STX Group as of the end of March, Kang holds 11.56 percent and ForceTec holds 23.1 percent.
Given that Kang holds 69.38 percent of shares of ForceTec, Kang technically has been able to fully control STX Group.
“The ultimate goal of a voluntary restructuring plan is to normalize a company, and it’s not about maintaining corporate governance structure,” said a creditor who asked not to be named.
ForceTec’s STX Group shares have been cut by more than 10 percentage points in the past month.
ForceTech has taken out a combined 41.7 billion won in loans by using its STX shares as collateral with the Korea Securities Finance Corporation and other financial institutions.
Related institutions sold off these shares after STX Group’s stock prices tumbled.
If Woori Bank goes ahead with its plan to dump STX Group’s shares, Kang and ForceTec’s ownership of STX Group shares will dwindle below 10 percent, market observers said.
The latest development is likely to leave Kang with his house and a handful of ForceTec shares.
Creditors are also in discussions about restricting management rights of major shareholders by seeking a capital decrease and debt-to-equity swap of STX Group’s affiliates.
“Chances are high that STX Group will face a capital decrease and debt-to-equity swap,” said a creditor.
STX Group Chairman Kang has reportedly responded to Woori Bank that he isn’t bothered by the decision and hasn’t given it much consideration.
By Kim Mi-ju [firstname.lastname@example.org]