Kookmin Underwear Ssangbangwool, Delisted Despite Ownership Change... Complicated Cash Flow [Business & Issues]

Trading Halted After North Korea Remittance Scandal
Sold to Nature Republic Amid Capital Erosion

The Ssangbangwool headquarters building in Sindang-dong, Jung-gu, Seoul. Photo by Yonhap News

After nearly two years of halted trading following the North Korea remittance trial, Ssangbangwool has finally been delisted. Ssangbangwool attempted to avoid delisting by selling its shares to Nature Republic and even announced the dissolution of the group, but the repercussions of embezzlement and breach of trust by the former management ultimately hindered these efforts. Instead, a Nature Republic affiliate, which is in a state of complete capital erosion, acquired Ssangbangwool, bringing to light the complex financial flows intertwined among KH Group, Nature Republic, and Ssangbangwool.

Major Shareholder Changed... Delisting Decision Due to Management Embezzlement and Breach of Trust

Former Ssangbangwool Group Chairman Kim Seong-tae, who was caught in Thailand while fleeing abroad in January 2023, returning to Korea. Photo by Kang Jin-hyung

On the 12th, Ssangbangwool publicly announced that it filed an injunction to suspend the effect of the delisting decision with the Seoul Southern District Court in response to the Korea Exchange's delisting decision. Ssangbangwool stated, "The delisting decision is not only a problem for the company but also causes significant damage to numerous small shareholders," and added, "We will use all means, including legal procedures, to fully prove the unfairness of the delisting."

Initially, Ssangbangwool's stock trading was suspended in July 2023 due to the involvement of former chairman Kim Sung-tae in the 'North Korea remittance case,' where he delivered 8 million dollars to North Korea at the request of former Gyeonggi Province Peace Deputy Governor Lee Hwa-young, leading to charges of embezzlement and breach of trust by the management. Subsequently, in December 2023, the Korea Exchange granted a one-year improvement period to avoid delisting, but the period ended last December, resulting in the final delisting decision.

The Exchange explained, "After comprehensively considering Ssangbangwool's implementation of the improvement plan, corporate continuity, management transparency, and other factors such as public interest realization and investor protection, it was determined that the delisting criteria were met."

If the court dismisses Ssangbangwool's injunction request, the delisting process will proceed. The Exchange announced plans to allow organized trading of Ssangbangwool shares from the 17th to the 25th and to delist the company on the 26th.

Ssangbangwool Group Dissolution and Going Separate Ways... But Gwanglim Also Faces Delisting

On the 20th of last month, Ssangbangwool Group attempted to avoid delisting of the two listed companies, Ssangbangwool and Gwanglim, through the sale of Ssangbangwool. Gwanglim, the controlling company of Ssangbangwool, sold 632,297 shares (12.04%) it held to Segye Prime Development, an affiliate of Nature Republic, for 7 billion won, and subsequently dissolved the group. They hoped that by avoiding the embezzlement and breach of trust risks associated with the former management, which had become a major issue for delisting, and improving the governance structure, trading could resume.

Ssangbangwool was founded in 1954 under the name Hyeongje Sanghoe and went through Samnam Meriyas in March 1962 and Ssangnyeong Textile Industry in 1963 before maintaining the Ssangbangwool name since 1977. It operates underwear brand TRY and women's lingerie brand Shaville. After going bankrupt during the 1998 IMF financial crisis, ownership changed hands several times until former chairman Kim acquired it in 2010.

On the 4th, Ssangbangwool Group declared the dissolution of the group and removed the group CI in the lobby of the Ssangbangwool Group headquarters building in Sindang-dong, Jung-gu, Seoul. Photo by Yonhap News

Through various mergers and acquisitions (M&A), Ssangbangwool Group grew into a mid-sized group. Just before the sale of Ssangbangwool, the governance structure was a circular shareholding chain connecting Ssangbangwool → Vivian → Dimoa → NSE&M → Jayjun Cosmetic → Gwanglim → Ssangbangwool.

Suspicion Spreads Over Ssangbangwool Acquisition... Nature Republic Still in Capital Erosion

The Nature Republic store in Myeongdong, Seoul. Photo by Yonhap News

Segye Prime Development, which acquired Ssangbangwool on the 20th of last month, is a real estate rental company affiliated with Nature Republic, with Nature Republic chairman Jung Woon-ho holding a 40% stake. Various suspicions have been raised about the source of acquisition funds since the acquisition announcement.

As of the end of 2023, Segye Prime Development's cash equivalents reported in April last year amounted to only 874.38 million won. Nature Republic also reported cash equivalents of 577.05 million won in its Q3 report last year and was in a state of complete capital erosion with a total equity of -6.0969 billion won. Given this structure, it was difficult to raise the 7 billion won acquisition funds for Ssangbangwool with its own capital, raising doubts about the source of funds.

The financial rescuer role was taken by KH Group. Three days before Segye Prime Development acquired Ssangbangwool, on the 17th of last month, Nature Republic announced the issuance of convertible bonds (CB). The CB issuance was worth 7 billion won, and the stated purpose was to repay a short-term loan of 10.35 billion won borrowed from Segye Prime Development. The CB was issued to 'Bibiwon Association,' a subsidiary of KH Philux, an affiliate of KH Group. This created a financial flow from KH Group → Nature Republic → Ssangbangwool.

KH Group has maintained a long-standing mutually friendly investment relationship with Ssangbangwool Group and has participated in CB issuances of Ssangbangwool Group companies such as Gwanglim and NSE&M. KH Group chairman Bae Sang-yoon is also known to have a personal friendship with former chairman Kim.