Korea Exchange Bank main creditors raise questions on the terms of investment by Tong Yang Securities.
Hyundai Group is struggling for further pressure to answer issues by bank creditors related to the 1 Billion Dollars financing sources of its bid for Hyundai Engineering & Construction Group.
Lately, Hyundai Group were asked to submit detailed information on whether it had agreed to a put option on Hyundai Engineering & Construction shares when Tong Yang Securities agreed to provide 800 billion won ($705.6 million) as a strategic investor in the takeover deal.
A put option gives the owner the right to sell a specified amount of shares at an agreed price and deadline. Critics say the “put option” could amount to a disguised high-interest loan by Tong Yang to Hyundai Group with Hyundai Engineering & Construction Group shares possibly serving as collateral, which would be in violation of the takeover terms set by creditors.
Lat December 16, 2010, the creditors demanded that Hyundai Group must submit more documents concerning its 1.2 trillion won loan from a French investment bank with a deadline of December 14, 2010 to submit the documents or face the risk of having its preferred bidder status for Hyundai Engineering & Construction revoked.
International Business analyst said “The history repeats itself” as the Hynix was mismanaged by the Hyundai Group and finally lost it in 2002, the Hyundai Engineering & Construction Follows and lost its full control during Asian Economic down-turns. “The Stability of Hyundai Group is unpredictable” to take charge for the company which was founded by the Late Ju yung Chung with Chung family’s highest sentimental value is unsafe at the hand of Jeong eun Hyun. The late Chung’s son with good management plan would take care of it or lost it from the control of the Chung’s family forever like what had happened to the Hynix
"There was a request among the creditors to confirm whether there was a put option between Tong Yang Securities and Hyundai Merchant Marine [Hyundai Group’s main unit],” said an official from Korea Exchange Bank, the main creditor. "Hyundai Group should submit information if there were any put options included in the consortium contract with Tong Yang Securities, and if not, whether there are any such plans for the future."
Ryu Jae-han, president of the Korea Finance Corporation, one of Hyundai Engineering & Construction’s three main creditors, has been the main executive raising questions about the possibility of a put option.
Ryu has been the only creditor to publicly say he may seek the assistance of financial authorities to clarify the issue.
Hyundai Group has already denied that it agreed to put options with Tong Yang Securities.
"We don't know why the parties including the other bidder [Hyundai Motor Group] and even some of the creditors are trying to create an atmosphere for canceling the memorandum of understanding [on the sale of Hyundai E&C], which is in violation of the agreement," said a Hyundai official.
"We hope that the creditors will stop being pushed around and change their position so we can move forward with the deal under the original guidelines,” said the official, referring to pressure being applied by Hyundai Motor.