MBK's Choi Yoon-beom Prepares in Advance for 'Mutual Shareholding Restrictions'... SMC Debt Guarantees Surge at Year-End

Korea Zinc's Debt Guarantee for SMC Surged in Q4 Last Year
Preemptive Credit Enhancement... Circular Shareholding Structure Prepared in Advance
"Chairman Choi Yoon-beom Used Subsidiary as a Private Slush Fund"

Choi Yoon-beom, chairman of Korea Zinc, who is engaged in a management rights dispute with Youngpoong and MBK Partners, is suspected of having prepared the 'mutual share voting rights restriction' used the day before the temporary shareholders' meeting in January since the end of last year. It is alleged that he secured funds to acquire Youngpoong shares by rapidly increasing debt guarantees for Sun Metal Corporation (SMC), a subsidiary established in Australia, from the fourth quarter of last year. Chairman Choi acquired Youngpoong shares to create a circular shareholding structure prohibited under current law, thereby restricting the voting rights of Youngpoong and MBK and defending his management rights at the recent shareholders' meeting.

On the 2nd, Youngpoong and MBK claimed that Korea Zinc's debt guarantee amount and outstanding debt balance for SMC surged in the fourth quarter of last year. According to Korea Zinc's large business group status disclosure on the 28th of last month, the debt guarantee amount and outstanding debt balance for SMC at the end of the fourth quarter of last year increased by KRW 25.568 billion and KRW 41.432 billion respectively compared to the third quarter of the same year.

SMC is the company that purchased 10.3% of Youngpoong shares from Chairman Choi's family and others one day before Korea Zinc's temporary shareholders' meeting in January, and was used to exclude the voting rights on Korea Zinc's 25.4% stake held by Youngpoong. Youngpoong and MBK pointed out that "there is evidence that Chairman Choi intentionally used SMC as a tool to acquire Youngpoong's shares."

At the hearing on the injunction to suspend the effectiveness of the shareholders' meeting resolution filed by Youngpoong and MBK against Korea Zinc on the 21st of last month, Chairman Choi's legal representative stated, "The review for acquiring mutual shares was conducted before January 22, when SMC acquired Youngpoong shares."

Youngpoong and MBK argued that considering Chairman Choi's court statement and the hundreds of billions of won surge in SMC's outstanding debt balance, the mutual share investment restriction method was deliberately used. They also emphasized, "Since Chairman Choi was the CEO of Korea Zinc during this period and also served as a director of SMC, it can only be seen that he led this matter."

Earlier last month, Korea Zinc claimed that its guarantee for SMC's borrowing limit was approved in 2022, long before any hostile merger and acquisition (M&A) attempts occurred.

Youngpoong and MBK pointed out that this claim is also false. They stated, "Chairman Choi's side, who had to create an illegal investment structure in advance, reinforced SMC's credit through debt guarantees and then used the cash secured through this to have SMC acquire Youngpoong shares," adding, "This again proves that Chairman Choi holds the dangerous belief that he can ruthlessly sacrifice SMC, an important Australian production plant in zinc smelting, and can use Korea Zinc's funds as a personal slush fund at any time."