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Aekyung Group mulls sale of flagship unit as Korea Inc. battles cash crunch

Published: 17 Apr. 2025, 16:48 Updated: 17 Apr. 2025, 20:01

Won and dollar bills are stacked at Hana Bank's offices in Jung District, central Seoul, on April 17. [NEWS1]

Aekyung Group is considering selling its flagship unit, Aekyung Industrial, as Korean companies across all sectors face growing liquidity strains amid rising interest rates and a slowing global economy.

On April 1, Aekyung Industrial CEO Kim Sang-jun gathered employees at the company’s headquarters in Mapo District, western Seoul, for an emergency meeting.

“The group is reviewing procedures to sell Aekyung Industrial to improve our finances,” Kim told the staff.

The announcement came as no surprise. Aekyung Group, whose main businesses span household goods, petrochemicals and aviation, has been hit hard since the Covid-19 pandemic. The company had already put properties like department store AK Plaza on the market, but found no buyers. It also resorted to multiple rounds of capital increases.

In December, a plane operated by Jeju Air, a key affiliate of Aekyung, skidded off the runway at Muan International Airport in South Jeolla and exploded, killing 179 passengers and crew. The incident worsened the company’s liquidity crisis.

The group’s holding company, AK Holdings, had 4 trillion won ($2.8 billion) in debt at the end of last year, with its debt ratio reaching 328.7 percent.

The group ultimately decided it had no choice but to put Aekyung Industrial — the conglomerate’s first and flagship unit — up for sale.

“Even a company with a 71-year history must consider selling its core operations to survive,” an Aekyung official said.

Environment advocate groups and victims of Aekyung Industrial's humidifier disinfectant products hold a protest in front of the firm's headquarters in Mapo District, western Seoul, on April 14. [YONHAP]

Corporate liquidity crisis deepens amid economic headwinds

The prolonged phase of high interest rates, a strong dollar and rising prices, combined with the global slowdown and ongoing U.S.-China trade tensions, have sharply squeezed corporate liquidity. Even conglomerates in sectors like secondary batteries, petrochemicals and construction are grappling with mounting debt.

Small and mid-sized firms face even greater pressure, especially those dependent on domestic demand.

A 55-year-old CEO surnamed Kim, whose firm is based outside greater Seoul, is now struggling with sleepless nights. Kim’s company must repay portions of a 15 billion won loan used for facility investments last year.

“Revenue dropped by 10 billion won compared to the previous year, and now it’s extremely difficult to extend the loan,” Kim said.

According to the Financial Supervisory Service, 70 trillion won worth of corporate bonds will mature between February and the end of this year. That signals mounting pressure to either refinance or repay existing debts. Small and mid-sized firms often face far worse lending conditions than major conglomerates.

Hong, a 65-year-old CEO of a food company in North Chungcheong, echoed this concern.

“Large companies can at least borrow from top-tier banks, but for us, the requirements are much tougher, and banks are tightening lending,” Hong said.

“Secondary lenders charge interest rates above 10 percent yearly, so we’re just trying to hold on for now.”

“The bond market could freeze rapidly if more companies like Homeplus file for court receivership,” said Ha Joon-kyung, an economics professor at Hanyang University.

“Even companies with strong credit ratings could face higher financing costs and liquidity challenges.”

Major players also feel the squeeze

The financial pressure isn’t limited to smaller firms. SK Group is reportedly considering selling its stake in SK siltron, a chip wafer manufacturer that posted 2.13 trillion won in revenue and 315.5 billion won in operating profit last year.

The possible divestment of such a profitable unit underscores the extent of the liquidity challenges, even for Korea’s second-largest conglomerate.

In the construction sector, fears of a financial crunch are spreading. After talk of a crisis in April, concerns are now surfacing about a potential crisis in July.

According to a report published by NICE Investors Service on Wednesday, the number of construction companies among the nation’s top 100 showing signs of financial distress is expected to rise to 15 this year, from 11 last year.

The report evaluated distress using four indicators: operating losses, a debt ratio exceeding 400 percent, net debt reliance over 40 percent and accounts receivable accounting for over 30 percent of total assets or 35 percent of revenue.

The number of construction firms meeting two or more criteria rose from 3 in 2022 to 8 in 2023 and 11 last year. Most of these are ranked between 31st and 100th in terms of construction capacity — mid-tier builders are particularly vulnerable to liquidity risks.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY KIM KI-HWAN,LEE HYUN [[email protected]]