By Kim Tae-jong
A local court is expected to select a manager this week to control the troubled Woongjin Group after affiliates Woongjin Holdings and Kukdong Engineering & Construction applied for court receivership in late September.
It is highly expected that the court will have a third party run the ill-fated conglomerate as creditors have called for the court to select a non-Woongjin man.
The Seoul Central District Court said it had no plan to carry out additional questioning to decide whether it will begin court-managed workout programs for the troubled firms.
Although the decision to allow receivership usually takes a month after a firm files for protection, the court will reach a conclusion as early as possible as the government has temporarily implemented a fast-track initiative. It is aimed at providing liquidity to companies until the end of next year so they can finish with court receivership within six months.
Market insiders believe judges will make a decision no later than this week because it will already be two weeks since Kukdong and Woongjin Holdings filed for court receivership on Sept. 26.
Kukdong failed to honor commercial papers worth 15 billion won and other maturing loans, and Woongjin Holdings did the same because it stood as joint surety for a 1 trillion won loan taken out by the builder.
At the beginning of court receivership, judges also appoint a professional manager to mediate differences between a troubled firm and creditors as the first step.
According to market sources, creditors have requested to designate a third party to manage the workout program for the troubled firms and the group has not opposed it. The court is also expected to accept the creditors’ request.
A court-designated manager will play an important role in handling key activities of the group under court control.
Under the current law, management can maintain control of a company while it is under court receivership, unless judges find its critical mistakes can damage the business.
But there is slim chance the management of the two firms will be appointed by the court as creditors of Woongjing Holdings and Kukdong strongly oppose it.
Meanwhile, the financial authorities have launched an investigation into fraud allegations surrounding group Chairman Yoon Seok-guem and other executives.
They are suspected of abusing court receivership and dodging their responsibility as they intentionally did not honor the commercial papers and repay owed debts. They were found to repay loans to subsidiaries a week before filing for court receivership.
Investors may take class action depending on the investigation results, if any irregularities in the practices of issuing commercial papers are found.