Dongbu asked FSS for more time to restructure

Financial Supervisory Service Governor Choi Soo-hyun was pressuring Dongbu Group to swiftly implement its restructuring plan that the cash-strapped group announced in November to attract additional support from creditors, according to the JoongAng Ilbo yesterday.

Choi secretly met with Kim Jun-ki, chairman of Dongbu Group, on May 10, and said if the restructuring of its manufacturing affiliates is not implemented soon, its financial subsidiaries could also be damaged, a source in the financial industry told the JoongAng Ilbo.

Dongbu asked the FSS governor to be more lenient toward the group, but the governor advised the conglomerate to implement its affiliate restructuring plan as scheduled, the source said.

According to the source, the meeting was arranged after Choi said he wanted to talk candidly with Kim. Early last week, Cho Young-je, senior deputy governor at the FSS, also met with Choi Yeon-hee, chairman of construction and agriculture businesses at Dongbu Group, another source said.

The alleged series of meetings between the FSS heads and Dongbu chairmen came as Dongbu is resisting selling its Dongbu Steel factory in Incheon and Dongbu Power Dangjin Corporation, the key parts of its 3 trillion won ($2.92 billion) rescue plan.

Creditors insisted that Dongbu hand over Dongbu Incheon Steel and Dongbu Power Dangjin Corporation to top steelmaker Posco immediately through a private contract, but Dongbu instead said it would separately sell the companies through competitive bidding.

While creditors are focusing on the pace of restructuring, Dongbu is determined to sell its affiliates at higher prices.

Due to the lack of unification between the two, KDB began to doubt Dongbu’s commitment to its financial restructuring plan and said it will withhold a 140 billion won bridge loan it had planned to offer.

On April 25, when Dongbu’s 92.1 billion won worth of warrant bonds was due to be paid, the group nearly defaulted but was saved when it received emergency funds from KDB and put down the Dongbu Group chairman’s home in Hannam-dong, central Seoul, and shares worth 10.8 billion won as additional collateral.

Posco plans to come up with a specific acquisition price for the steel plant and power corporation by the end of this month, after inspecting the two companies for sale. The KDB plans to make the sale in July.

The conflict has been settled for the time being but the situation can change if the sales process is disrupted.

Dongbu Group requested that the sale of Dongbu Metal be postponed after the proposed price nosedived due to the sluggish market.

According to industry insiders, Dongbu told KDB that it will sell real estate worth 540 billion won.

It is also highly likely that creditors will request that the company put down the Dongbu Group chairman’s private properties if the restructuring plan is disrupted.

BY PARK JIN-SEOK AND KIM JUNG-YOON [kjy@joongang.co.kr]