Assets unloaded by the big and the broke

Large Korean companies are unloading assets to raise much-needed cash as their markets collapse and cash flows dwindle.

Land and offices especially are being made available in a rush by indebted corporations and those with stressed balance sheets.

No one is calling them fire sales yet, but they are being undertaken with an urgency that suggests few other options and very little time.

Hyundai Steel, Korea’s second-largest steelmaker, will put its office building in Jamwon-dong, southern Seoul, up for sale. The company confirmed the sale and said that it was putting the property on the market to raise “liquidity.”

Retailers too are shedding assets fast and furious as malls and restaurants sit empty.

Emart sold land in Magok-dong in western Seoul for 815.8 billion won ($669.2 million) last month to a consortium led by Taeyoung Engineering & Construction and Meritz Securities.

The company purchased the property in 2013 to build a Starfield shopping mall, but the plan was scrapped.

The deal is intended to “improve its balance sheet and secure resources for investment,” according to a stock exchange filing submitted by Emart.

The coronavirus outbreak is not the sole reason for the selling; the chain suffered an operating loss of more than 10 billion won in the fourth quarter last year following its first-ever quarterly deficit in the second quarter.

CJ Foodville, a food service company, announced “emergency measures” to shore up cash flows last month.

The restructuring will be focused on selling fixed assets including real estate, shutting restaurants and putting employees on shortened schedules, according to CJ Foodville CEO Jeong Seong-pil in a statement.

CJ Foodville “will make the best efforts to unload fixed assets such as real estate, suspend all new investment and cut costs in response to the global economic downturn caused by the Covid-19 virus,” the CEO said in the statement.

The unit runs restaurant brands such as VIPS and Season’s Table and bakery chain Tous les Jours.

“Sales at our restaurant business deteriorated at the beginning of this year,” said Shin Hyo-jung, a public relations manager at CJ Foodville.

Shin said that the company closed one of its VIPS restaurants in Seoul this year in the face of declining customer numbers and sales.

In detailing the potential assets to be sold, Shin said they might be “restaurants owned by the company outside of Seoul,” although no details have been decided.

Faced with dwindling sales and the cancellation of an investment from Indian parent company Mahindra & Mahindra, SsangYong Motor is unloading its logistics center in Busan.

The airline industry, which has been crushed by the outbreak, led with asset sales.

Hanjin KAL, which owns 30 percent of Korean Air Lines, said in February that it will sell off resort and hotel properties.

The group sent letters to 12 financial institutions last month to select an adviser for selling its non-core property assets, including a large plot of land in Songhyeon-dong in Jongno District, central Seoul; Wangsan Marina Resort in Incheon; and the Paradise Hotel in Seogwipo, Jeju Island.

At its shareholder meeting last month, Hanjin KAL pledged to market more properties to service debt, which is now about 22 trillion won.

The clamor for cash also appears to be linked with corporate bonds reaching maturity.

Around 6.5 trillion won worth of bonds floated by Korean companies become due in April. SK Group companies are required to pay off 650 billion won, while Lotte companies have to come up 500 billion won.

SK networks, a trading company with a AA- credit rating, sold off its gas station business for 1.3 trillion won ahead a 280 billion won payment at the end of April.

Other companies opt to tap credit from banks.

The Bank of Korea said on Wednesday that loans held by corporations reached an all-time high at 901.4 trillion won in March, a record high since the statistic was first compiled in June 2009.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]