By Oh Young-jin
Assistant managing editor
Will Hyundai Group Chair-woman Hyun Jung-eun be able to win this battle?
On the surface, the 56-year-old head of the group, which is composed of Hyundai Merchant Marine, Hyundai Elevator and Hyundai Asan, along with other smaller firms, appears to be fighting for a cause but, in reality, and underneath it all, she is fighting for her corporate life.
The latest conflict started when her group refused to sign on a creditors-led debt-reduction plan three times, arguing that its main creditor Korea Exchange Bank (KEB) didn't consider the unique business model of its flagship Merchant Marine and tried to apply the uniform rules to it.
In the process, Hyundai demanded that KEB be replaced as its main creditor bank. It was unprecedented for a corporation of its size to switch its main creditor bank. Over 40 troubled big firms have been told to sign up for creditors-led arrangements but all except for Hyundai complied.
Hyundai also pressed on its threat, saying that it will pay back the over 160 billion won it owes to KEB. Hyundai has outstanding debt in total to the tune of 1.5 trillion won, about two thirds or the largest portion owed to the state-run Korea Development Bank (KDB).
When the third deadline set last week passed, KEB, together with 12 other creditors, decided to put a freeze on new loans, not ruling out the possibility of turning up the pressure on the troubled conglomerate.
Hyundai officials remain defiant, claiming that the KEB ownership under private equity fund Lone Star is another reason why it wants to terminate its current relationship with the bank, which has served as its main creditor bank for over 40 years.
They argued that Lone Star wants to sell its controlling stake in KEB and leave anytime so this "unstable" relationship is affecting its business management.
This allegation is obviously a low blow with Hyundai not being able to substantiate it but could be effective in public relations (PR) warfare. At the same time, it also showed that Hyun as a female CEO and widow may think that public opinion may be on her side, if the battle continues.
This is obviously a burden on KEB CEO Larry Klane and Chairman Richard Wacker. It is said that the two decided from the start to avoid any confrontation with Hyundai, although they may be amused to see the group go back on its promise it had made six months ago and blame the bank for its own failure to keep it. The bank has refrained from escalating the situation in contrast with Hyundai, which has issued one strong-worded statement after another.
Most likely, her standoff with KEB is related to her bid to take over Hyundai Engineering and Construction, which is on the lookout for a new owner after years of creditors-controlled debt workout programs.
The construction firm is the symbol of her late husband Chung Mong-hun's defeat in what is called the "war of princes" involving the three sons of the late Hyundai founder Chung Ju-yung.
Mong-hun was tapped as heir apparent but his elder brother Mong-koo, now chairman of Hyundai-Kia Automotive Group, rebelled, while Mong-joon, the younger, joined. In the end, the group was split into three parts ― Mong-koo winning the group's motor business; Mong-joon taking over Hyundai Heavy Industries and Mong-hun left with Hyundai Construction and the lesser parts of the group. Then, Mong-hun jumped to his death from his office in August 2003. Soon, widowed Hyun took over and declared that she would win back the firm to realize her husband's wishes and prove that her group is the legitimate successor of the founder's business empire.
Sounds corny? It should.
First it is public knowledge that Hyun and her late husband's brothers are not on speaking terms, that is, if they are ever together in one place.
Hyundai Motor has changed its stance, now saying that it is interested in the construction firm, while Hyundai Heavy appears ready to help Mong-koo, if it doesn't go on a solo bid. Maybe, the two Chungs are becoming more Confucian as they grow older, trying to buy legitimacy on their side while ostracizing Hyun and her two daughters.
Here is a lowdown.
Hyun's group is anchored on Merchant Marine. Its affiliate Hyundai Elevator has a 20.6 percent stake and a group of banks and firms, which are friendly to Hyun, has another 25 percent stake, meaning Hyun can mobilize about 45 percent when it comes down to a dispute for management control.
About 32 percent in stake is under the control of her in-laws, with Hyundai Heavy holding the most at over 17 percent. Hyundai Construction has an 8.3 percent stake, meaning that, if the firm ends up in the hands of Hyundai Motor or Hyundai Heavy, Hyun's management control could be seriously challenged. As a matter of fact, there was an attempt to dethrone her right after she took over the group but she successfully overcame it, consolidating her control since.
Nevertheless, Hyun can't sign on the debt reduction arrangement currently being pushed by the creditors because it will force her to hold down on new loans, which are pivotal to her attempt to take over Hyundai Construction.
At present, it is said that Hyun has more than 1 trillion won in liquidity, far short of the over 3 trillion won required to buy the firm. Besides, it is an open question how liquid her 1 trillion won actually is.
So excuse Hyun for not sleepwalking like Lady Macbeth and uttering out of remorse, "Out, dammed spot!" She can't afford that kind of inner reflection. Thus, be on the watch for her because this battle might get nasty.