Myongji University and Myongji College Integration - Property Sale... Myongji Academy Plans to Reapply for Rehabilitation Proceedings

Plan to Reapply for Rehabilitation Procedure at the End of March
Ministry of Education Holding Approval Authority Says "Supplement Needed"

Myeongji Academy, facing bankruptcy, is reviewing a rehabilitation plan that involves merging Myongji University and Myongji College and repaying debts by selling revenue-generating assets owned by the university.

On the 10th, Myeongji Academy prepared this plan and decided to reapply for rehabilitation procedures at the Seoul Rehabilitation Court by the end of March. After merging Myongji University and Myongji College, the academy plans to establish a Project Financing Vehicle (PFV) to sell the Myongji College site and repay debts with the development profits.

Myeongji Academy expects to secure more than 50 billion KRW from the sale of the Myongji College site. The integration of schools and asset sales are not legally impossible. However, the Ministry of Education, which holds the approval authority, believes that supplementation is necessary. A Ministry of Education official said, "The plan to secure about 5 billion KRW in investment funds needed to establish the PFV must be concrete."

Myeongji Academy is also considering selling revenue-generating assets such as Elpenheim. To sell basic revenue-generating assets, approval from the Ministry of Education is required, a certain standard amount must be secured, and if sold, it must be replenished. Currently, Myongji University has secured about 60% of the standard amount for revenue-generating assets. A Ministry of Education official explained, "There must be a plan on how much and by when to restore the assets after disposal to review or approve based on that."

The fate of Myeongji Academy essentially depends on the Ministry of Education. The structure is such that whether the financial difficulties can be overcome depends on how far the approval authority for disposing of revenue-generating assets is recognized. The Myeongji Academy side explained, "A progressive change in the Ministry of Education's attitude and legal support to prepare for similar cases are urgently needed."

A Ministry of Education official said, "If a reasonable asset preservation plan is presented, approval can be considered, but so far, it has not been. The school corporation has created debts it cannot handle, but the rehabilitation plan does not include any sacrifices. Since the court has decided to suspend the rehabilitation procedure, a more active restructuring plan and rehabilitation plan from the school corporation are needed."

Myeongji Academy faced a crisis after selling the ‘Myeongji Elpenheim’ senior town on the Yongin Myongji University campus site in 2004 but failed to fulfill the initially promised golf course construction. At that time, a court ruled that 33 buyers should be compensated 19.2 billion KRW, but since compensation was not made, creditors filed for bankruptcy. The eldest son of the founder of Myeongji Academy, former director Yoo Young-gu, sold the Myeongji Building for 260 billion KRW in 2007 to prevent the bankruptcy of Myeongji Construction but was also imposed a gift tax of 57.6 billion KRW for using public corporation assets to repay Myeongji Construction loans.

The 18th Division of the Seoul Rehabilitation Court decided to suspend Myeongji Academy’s rehabilitation procedure on the 9th. Myeongji Academy’s debt amounts to about 235.8 billion KRW, of which tax claims alone exceed 100 billion KRW. The rehabilitation plan submitted by Myongji University includes repaying about 180 billion KRW of this amount.