SM Group Acquires ‘Beom Hyundai Family’ Construction Company HN Inc... Court Enforcement?

Court: "All Stakeholders' Interests Aligned"

The court has forcibly approved the rehabilitation plan of HN Inc, an IT and construction service company whose largest shareholder is the 'Beom Hyundai' family. Accordingly, Taecho E&C, an affiliate of the SM Group, will acquire HN Inc.

According to the legal community on the 10th, the Seoul Rehabilitation Court Division 3 (Chief Judge An Byung-wook) approved HN Inc's rehabilitation plan on that day. The court stated, "Although the rehabilitation plan was rejected because it did not obtain the statutory majority consent from the rehabilitation creditors' group, it was judged that approving the rehabilitation plan aligns with the interests of rehabilitation secured creditors, rehabilitation creditors, employees, and all other stakeholders."

The court cited the following reasons for the forced approval: ▲ the rehabilitation plan complies with the principle of guaranteeing liquidation value ▲ more than half (50%) of the total voting rights of rehabilitation creditors agreed to the plan ▲ the acquisition price was fully paid through a pre-approval merger and acquisition (M&A), making the plan highly feasible ▲ and the approval of the plan will allow the business to continue, helping to secure employees' jobs.

HN Inc is an IT and construction service company engaged in residential and urban-type housing construction, remodeling of apartment complexes and buildings, residential, industrial, and commercial construction projects, as well as civil engineering. Ranked 133rd in construction evaluation, its largest shareholder is Jeong Dae-seon, a member of the Beom Hyundai family. Jeong is the husband of former announcer Noh Hyun-jung.

From 2019 to 2021, HN Inc maintained stable sales in its construction and IT sectors, recording operating and net profits. However, due to the rapid rise in raw material prices caused by COVID-19 and the Ukraine war, construction costs and delay penalties increased. Additionally, economic recession and falling real estate prices led to a large-scale unsold inventory crisis, further worsening the financial situation.

To overcome the financial crisis, the company made efforts such as selling its headquarters building and some shares of subsidiaries, but it failed to repay matured corporate bonds and promissory notes, leading to the filing for rehabilitation proceedings on March 21 of last year.

The Seoul Rehabilitation Court decided to commence rehabilitation proceedings for HN Inc on April 7 of last year. In the pre-approval M&A process, Taecho E&C was selected as the final prospective acquirer. Taecho E&C signed a conditional investment contract on December 14 of the same year for 15 billion KRW and was confirmed as the final acquirer, having paid the full acquisition price.

However, at the stakeholders' meeting held on the 3rd for the review and resolution of the rehabilitation plan, the rehabilitation secured creditors' group approved the plan with 75.10% consent (meeting the three-quarters requirement), but the rehabilitation creditors' group only had 53.6% consent (failing to meet the two-thirds requirement), resulting in the plan's rejection.