DongA One put under workout program

By Park Jin-hai

Lee Hi-sang DongA One Group chairman

DongA One Group, a mid-tier business group focused on making flour, has been struggling to stay afloat over the past few months under snowballing debt.

The group has incurred huge losses from Chairman Lee Hi-sang’s “reckless venture” into wine-making, an imported car dealership and other non-core businesses.

Hit hard by its worsening bottom line, the group’s non-guaranteed bond credit rating has plummeted to the lowest C grade, the Korea Investors Service (KIS) said Thursday.

The grade is given to companies that have the highest risk of debt default and have no ability to repay the principal.

“Its rating has slipped to C from CC, which reflects its creditors’ recent decision to place it under a workout program,” said a KIS official.

The Korea Development Bank and other creditors decided to put the company under a creditor-managed workout program Tuesday.

The flour and animal feed manufacturer, led by Chairman Lee Hi-sang, has been snowed under with debt after excessive business expansion sprawling out to 30 affiliates including a U.S. winery and an imported car dealership that imported Maseratis.

Lee is the father-in-law of former President Chun Doo-hwan's third son.

Lee through marriages with powerful families has expanded his empire. The company has been related with former presidents and conglomerates including Hyosung group and Shindongbang group through marriage.

However, following the 89.6 billion won debt it posted last year, it has accrued 38.1 billion won in debts as of September this year.

After the company’s debt reached 285 billion won as of the third quarter, its creditors decided to sell its assets without any further injection of cash.

Hit hard with insolvency, it delayed the payment of employee wages in December for the first time ever.

Its imported car dealership FMK was sold in March, while its wine business has been suffering from debt and its fashion business has been liquidated.

Industry watchers say the demise of the company has been sped up by its ailing food unit DongA One Food, which imported meat from the U.S. after the ROK-US free trade agreement.

The food company posted a net loss of 8.3 billion won, over 10 percent of the group’s total net loss last year. Its core companies Korea Flour Mills and DongA One Corporation have made a payment guarantees for DongA One Food.

The company has also been included in 11 companies which received the C rating by the Financial Supervisory Service earlier.

The financial watchdog looked into 368 firms whose credit expansion surpassed 50 billion won ($42.59 million) and which showed signs of going bust.

The total number of companies subject to forced restructuring for this year has been pushed to 54, the largest since 2010, when a total of 65 firms were put on the restructuring list.

The government says there are more than 2,500 ''zombie'' companies unable to repay interest on loans with operating profits.