[Wealth Succession] Kona I② Chairman Jo Jeong-il's Family Company Takes on 'Mountain of Debt'

Kona Healthcare with Tens of Billions in Debt Acquired by Kona I Subsidiary
Chairman Jo Jeong-il Shifts Responsibility for Management Failure to Kona I

Jung Il Cho, CEO of Kona I.

Kona I acquired and merged a company that had accumulated billions of won in debt while being managed by Chairman Jo Jeong-il and his family. It is estimated that Kona I has already suffered losses amounting to 8.5 billion won due to this company, and with this acquisition, it has also taken on the debt.

According to the Financial Supervisory Service's electronic disclosure system on the 29th, Kona I established 'Kona Chain' last year by investing 2 billion won and then absorbed and merged its affiliate 'Kona Healthcare.'

Kona Healthcare was a company engaged in developing and providing national health management solutions and services. In 2016, Kona I initially invested 1.2 billion won, acquiring a 15% stake and becoming an affiliate. 'Kona M,' where Chairman Jo Jeong-il is the largest shareholder, also invested 1.2 billion won alongside Kona I.

After acquiring shares in Kona Healthcare, in 2017, Chairman Jo Jeong-il and his daughter, Jo Nam-hee, head of Kona I's Business Planning Division, were appointed as inside directors of Kona Healthcare. At that time, Chairman Jo increased Kona Healthcare's shares to 59% through Kona M. This meant that Kona Healthcare came under the control of Chairman Jo's family. In fact, Jo Nam-hee was appointed CEO of Kona Healthcare in 2022.

However, Kona Healthcare's performance deteriorated after being acquired by Chairman Jo's family. In 2016, Kona Healthcare recorded sales of 3 billion won and a net profit of 300 million won, but in 2017, it suddenly posted a net loss of 2.9 billion won, falling into complete capital erosion.

In response, Chairman Jo capitalized Kona Healthcare with 3.5 billion won through Kona I. As a result, Kona I's shareholding increased to 36.15%, while Kona M's shareholding decreased to 46.7%. Although Kona M's shareholding slightly declined, Chairman Jo's family still secured management rights and maintained their position as the largest shareholder.

Despite Kona I's support, Kona Healthcare's deficits continued to accumulate. In 2018, Kona Healthcare recorded sales of 100 million won and a net loss of 2.8 billion won. In 2019, it posted a loss of 3.4 billion won and again fell into capital erosion. Consequently, Kona I wrote off its entire 4.7 billion won investment in Kona Healthcare as impairment.

However, Kona I's support did not stop. From 2020, it began lending money to Kona Healthcare: 500 million won in 2020, 1.7 billion won in 2021, and 1.65 billion won in 2022, totaling 3.85 billion won over three years.

Each time Kona I lent money, it set aside the loan amount as an allowance for doubtful accounts. An allowance for doubtful accounts is an accounting method that reserves funds in advance for money that is unlikely to be collected. This means that Kona I anticipated not recovering the entire 3.85 billion won it lent.

During this period, Kona Healthcare recorded annual sales in the 100 million won range and net losses between 2 billion and 3 billion won, increasing its capital erosion rate every year, and as of last year, its debt had accumulated to 7.1 billion won.

Ultimately, last year, Kona I established Kona Chain by investing 2 billion won and then absorbed and merged Kona Healthcare. All of Kona Healthcare's debt was transferred to Kona Chain.

At the same time, Chairman Jo reduced his control over the heavily indebted company and stepped away from management rights. Before the merger, the largest shareholder of Kona Healthcare was Chairman Jo's family company Kona M, but after the merger, the largest shareholder of Kona Chain became Kona I (70.26%). Moreover, since Kona I recently acquired Kona M as well, the shareholding ratio is expected to increase further. Additionally, only Kim Bong-gyu, head of Kona I's Digital ID Development, and Kang Byung-ju, head of the Accounting Group, were included in Kona Chain's management team, with neither Chairman Jo nor Jo Nam-hee listed.

Regarding this, a Kona I representative stated, "The merger of Kona Healthcare and Kona Chain is unrelated to the controlling shareholder's governance structure."

Meanwhile, Kona I recently acquired Kona M, the family company of Chairman Jo Jeong-il, which had been grown through preferential business allocation. Notably, there was controversy when only a small portion of treasury shares, which shareholders had demanded to be canceled, were actually canceled, and the remainder was handed over to Chairman Jo and his family as consideration for the acquisition.