By Yoon Ja-young
Keangnam Enterprises, a construction company at the center of a recent bribery scandal, will be delisted from the stock market on Wednesday.
The Korea Exchange, the country’s bourse operator, said Tuesday that it would delist Keangnam in line with stock regulations because losses had wiped out its equity capital.
Its chairman, Sung Woan-jong, committed suicide last week after being investigated for alleged corruption in the “energy diplomacy” of the former President Lee Myung-bak administration. He left a list of politicians he claimed to have bribed, including close aides to President Park Geun-hye.
Founded in Daegu in 1951, Keangnam Enterprises grew to be one of the top 20 construction companies in the country.
It was the first Korean construction company to advance into overseas markets, winning orders from a Thai broadcaster in 1965. The company further expanded its business overseas, moving into the Middle East, Sri Lanka, Cameroon and Malaysia in the 1970s.
Keangnam had an IPO in February 1973, becoming the country’s first construction company to debut on the bourse.
It was acquired by the now defunct Daewoo Group in 1987, but went into a workout program in 1999. It successfully completed that program in December 2002, and expanded business after being acquired by Sung’s Dae-a Engineering and Construction in 2004.
Sung was a legendary figure in the construction industry. He did not complete his elementary school education due to poverty. He started the construction business by acquiring a 2 million won company in Seosan, South Chungcheong Province, and developed it into a leading company in the region. He made headlines by acquiring Keangnam, and expanded its annual sales to more than 2 trillion won.
While the global financial crisis was a blow to most local construction companies, Keangnam’s decision to involve itself in “energy diplomacy” during the Lee Myung-bak administration turned out to be a fatal blow. Several failed overseas energy development businesses made the company’s deficit snowball. It sustained 310.9 billion won in losses in 2013, and 408.4 billion won in losses last year.
Its shares hit 225,000 won in 1994, but plummeted after a series of capital reductions. Keangnam’s share price hovered around 4,800 won at the end of last year, but closed at 113 won Tuesday.
Creditor banks, which held shares in Keangnam due to a debt-equity swap, also sustained losses with the fall of Keangnam. Korea Export-Import Bank, which had a 10.9 percent stake in Keangnam, sustained about 20 billion in losses after selling the shares, and Korea Development Bank and Shinhan Bank are also estimated to have each recorded 12 billion won in losses.
The Seoul Central District Court determined last week that the company should go under court receivership after creditors rejected the company's request for additional financial support.