Hanp applies for corporate rehabilitation procedure... "Repaying debts by selling Jeju CC"

[Asia Economy Reporter Hyungsoo Park] Hanp has filed for corporate rehabilitation procedures to normalize its business operations. It plans to graduate from the rehabilitation process as soon as possible by reselling the golf course Jeju CC, which it acquired last year.

Hanp announced on the 24th that it has applied to the Seoul Rehabilitation Court to initiate rehabilitation procedures to overcome liquidity crises caused by deteriorating management and delays in loan recovery.

After acquiring Jeju CC last December using retained earnings, Hanp conducted a paid-in capital increase to prepare for the early redemption of convertible bonds (CB) issued by Wells Investment Advisory, which mature in April. However, the plan was disrupted due to an injunction lawsuit prohibiting the issuance of new shares.

Hanp explained that it is currently facing a liquidity crisis severe enough to struggle with purchasing raw materials for product manufacturing. As of the 24th, the outstanding CB amounts to a total of 29 billion KRW.

A Hanp official said, "Last December, Wells Investment Advisory and some shareholders filed an injunction lawsuit to prohibit the issuance of new shares," adding, "If a default situation occurs, Hanp's assets such as production facilities, factories, and Jeju CC could be seized."

The official continued, "Shareholders holding 2.2% of shares have also filed a lawsuit to propose a shareholder proposal agenda to appoint Hanp directors at the March shareholders' meeting," explaining, "It appears to be an attempt to highlight the management responsibility of Hanp's executives and to block additional fundraising."

He further stated, "If Wells Investment Advisory's management interference continues, it will eventually become impossible to raise funds, potentially leading to bankruptcy," emphasizing, "While typically distressed companies apply for corporate rehabilitation, Hanp currently holds enough assets to normalize once it overcomes the liquidity crisis."

Corporate rehabilitation is a system that preserves the assets of companies facing liquidity crises under court supervision, freezes debt repayments, and prevents unnecessary bankruptcy. Under a rehabilitation plan according to the law, debts are repaid through negotiations with creditors to restore the company to normal operations.

Hanp is preparing a rehabilitation plan to resell Jeju CC, which it acquired last year through a special purpose company (SPC). The plan will include ▲ close consultations with creditors based on the rehabilitation plan ▲ 100% debt repayment through the sale of Jeju CC ▲ conversion of major shareholders' equity contributions.

A company official said, "Although Hanp will be classified as a management item due to the rehabilitation application, it can immediately exit this status by repaying debts under court supervision," adding, "We have entered the process for selling Jeju CC and will ensure a transparent sale under the court's supervision."

The current management stated that while they will relinquish management rights through the corporate rehabilitation application, they will not pursue rehabilitation plans such as capital reductions that demand sacrifices from ordinary shareholders.

He said, "Although applying for corporate rehabilitation amid management disputes works against the management, we judged it to be the best choice to save Hanp," adding, "We will strive to conclude the rehabilitation as soon as possible without causing harm to not only good creditors but also ordinary shareholders."