Tongyang tanks after Orion snub
Yesterday in Seoul, shares of Tongyang Cement plunged 14.93 percent to close at 2,450 won ($2.28), while Tongyang Corporation shares dropped 14.73 percent to 955 won. Shares of Tongyang Networks fell 14.86 percent to 945 won and Tongyang Securities declined 14.87 percent to 2,690 won.
The owners of Orion Group and Tongyang Group are close relatives. Orion Group, the country’s leading confectioner, spun off from Tongyang Group in 2001. Tongyang Group was founded by its late chairman, Lee Yang-gu, who had two daughters whose husbands are Tongyang Group Chairman Hyun Jae-hyun and Orion Group Chairman Tam Chul-kon.
Tongyang Group, which specializes in cement manufacturing, needs to pay back more than 1.7 trillion won in debts maturing over six months. Five affiliates of Tongyang Group issued 876.3 billion won in commercial paper, 604.2 billion won in corporate bonds and 256.1 billion won in short-term loans. Previously, the conglomerate paid back debts by selling corporate bonds and commercial papers through its affiliate Tongyang Securities, but that will no longer be possible with a change in law starting next month that prohibits brokerage firms from selling low-credit corporate bonds through affiliates.
Business conditions for Tongyang Group have also worsened due to the sluggish construction and cement market with the lingering bad economy. In the third quarter of last year, Tongyang Group’s debt ratio, which refers to the ratio of total debt over equity capital, was 680 percent. That ratio this year over the same period skyrocketed to more than 1,200 percent.
With the financial situation expected to worsen for Tongyang Group, it reportedly requested help from Orion Group.
“Following reports that Tongyang Group asked Orion Group for financial help, we have been receiving continuous calls from concerned overseas investors and major shareholders for an explanation,” Orion Group said in a statement. “We came to a conclusion that there’s a need for us to clearly present our position that Orion Group and major shareholders do not have any intention of supporting Tongyang Group and that there will be no plan in the future, as well.”
While shares of Tongyang affiliates tumbled, shares of Orion Corporation went up 5.11 percent to close at 967,000 won yesterday.
BY LEE EUN-JOO [email@example.com]