Outstanding Debts Plague 'Lee Jaemyung-Themed Stock'... Father Uncertain About Successor [Second-Generation Management Begins] ④

Chairman Byungoh Choi Holds 90% Stake in Fashion Group Hyungji
Despite Backing Vice Chairman Junho Choi, Management Woes Persist
Subsidiaries Struggle to Improve Performance... Eldest Daughter's Company Also Falters

Chairman Byungoh Choi, who leads Fashion Group Hyungji, a company whose corporate value has fluctuated during this year's presidential election season, has fallen into concern. Although he established a family management system by entrusting key affiliates to his two children, the companies have all fallen into a slump of poor performance. In particular, Vice Chairman Junho Choi (41), whom Chairman Choi has chosen as his successor, is currently pursuing global expansion for the Hyungji Group, but has so far faced repeated setbacks. Now in his 70s, Chairman Choi has put his two children under management evaluation while postponing the transfer of his shares.

According to the Financial Supervisory Service's electronic disclosure system on May 22, Hyungji Global decided last month to conduct both a paid-in capital increase and a bonus issue. Hyungji Global is the new name of Castel Bajac, a golf apparel company acquired by Fashion Group Hyungji in 2014, and Vice Chairman Choi serves as its CEO.

(From left) Byungoh Choi, Chairman of Fashion Group Hyungji, Junho Choi, Vice Chairman of Fashion Group Hyungji, Hyewon Choi, CEO of Hyungji I&C.

Hyungji Group Siblings Turn to Shareholders to Repay Outstanding Debts

The paid-in capital increase amounts to 20.5 billion won, with 6 million new shares to be issued at 3,420 won per share. A bonus issue will also follow, allocating 0.5 bonus shares per existing share. The final issue price will be determined on July 7. Hyungji Global plans to use the funds raised through this paid-in capital increase to secure production volumes and repay accounts payable. As of the end of last month, Hyungji Global's accounts payable stood at 9.1 billion won on a separate basis, while its cash and cash equivalents as of the first quarter amounted to only 3.3 billion won. The company plans to use 5 billion won of the raised funds to repay accounts payable.

Until now, Hyungji Global has raised working and facility capital through privately placed bonds, convertible bonds, and bonds with warrants. This is the first time it is raising funds through a paid-in capital increase.

Hyungji I&C, led by eldest daughter Hyewon Choi (45), is also pursuing a paid-in capital increase of 39.3 billion won this year, allocated to existing shareholders. Hyungji I&C plans to use 20 billion won of the funds raised for debt repayment, 17 billion won for working capital, and 2.2 billion won for facility investments.

However, it remains uncertain whether the paid-in capital increases of both companies will be successful. Since April, listed affiliates of the Hyungji Group have seen their stock prices soar after being linked to Lee Jaemyung, the Democratic Party's presidential candidate. Hyungji Elite, which manufactures and sells school uniforms, emerged as a beneficiary stock due to Lee's implementation of a free school uniform policy during his tenure as mayor of Seongnam.

In the case of Hyungji I&C, the recent surge in its stock price resulted in the first issue price being set at 1,379 won, much higher than the initially expected price of 709 won, increasing the financial burden on existing shareholders participating in the paid-in capital increase. The fact that half of the public offering funds will be used for debt repayment has also heightened investor concerns.

Successor Junho Choi Accompanied Yoon Sukyeol on Overseas Trip... U.S. Business Abandoned

All of these companies have seen their performance plummet, worsening their financial difficulties. As of last year, Hyungji Global's sales stood at 39.8 billion won, down 18% from the previous year, while operating losses increased by 8 billion won. Compared to 2021, when the U.S. subsidiary was first established and sales reached 74.6 billion won, sales have dropped by 35 billion won. With the domestic market stagnating and abnormal weather conditions causing a downturn in the fashion industry, the end of the golf boom has led to an even steeper decline in sales for golf apparel brand Castel Bajac.

Castel Bajac is a luxury fashion brand created by French designer Jean-Charles de Castelbajac. After acquiring the domestic trademark rights for Castel Bajac, previously operated by EXR Korea, in 2014, Chairman Choi launched the golfwear brand and, in 2016, acquired PMJC, the French headquarters of Castel Bajac, thereby fully launching the Castel Bajac business.

Vice Chairman Choi became CEO of Hyungji Global in 2021 and established a local subsidiary to launch the Castel Bajac golfwear brand in the United States. In 2023, he opened the first flagship store in the Melrose area of West Hollywood, Los Angeles, and expressed a strong will to enter the U.S. golf club pro market. At the time, Vice Chairman Choi also joined the "economic delegation" that accompanied former President Yoon Sukyeol on his state visit to the United States.

At that time, CEO Choi targeted the U.S. federal procurement market, worth 10 trillion won, by registering with the U.S. federal General Services Administration (SMA) contract management system. He planned to supply various military items such as uniforms and combat boots to the U.S. military, with a long-term goal of expanding into the United Nations (UN) procurement market. However, the "Castel Bajac U.S. subsidiary" was excluded from Hyungji Global's consolidated entity last year. A Hyungji Global official explained, "There were changes in the U.S. political landscape, and disagreements arose during negotiations, so we determined that a review of the new business was necessary," adding, "We will support the company's expansion into Southeast Asia and ASEAN (Association of Southeast Asian Nations) distribution markets to ensure it plays a key role in Hyungji Group's global business."

Chairman Byungoh Choi Holds 90% Stake... When Will the Succession Take Place?

Hyungji Group is structured so that Fashion Group Hyungji, which functions as a holding company, controls key subsidiaries such as Hyungji Elite, Hyungji I&C, and Hyungji Global. Chairman Choi holds a 90.39% stake in the unlisted Fashion Group Hyungji.

Fashion Group Hyungji began in 1982 as "Crownsa," founded by Chairman Choi at Dongdaemun Market. After launching "Crocodile Lady" in 1996, it grew to become the top women's clothing brand in South Korea. The company subsequently expanded its brand portfolio with Chatelaine (2006), Razelo (2008), and Arnaldo Bassini (2009), and in 2012 acquired menswear specialist Woosung I&C (now Hyungji I&C). In 2013, it entered the school uniform business by acquiring Elite Basic (now Hyungji Elite).

In 2011, Chairman Choi's son, Vice Chairman Choi, joined Hyungji Group and began his management training. He was appointed CEO of Hyungji Global in May 2021, became president of Fashion Group Hyungji in December of the same year, and took on the role of CEO of Hyungji Elite the following year. In November 2023, he was named vice chairman of Fashion Group Hyungji, firmly establishing his position as the successor. The eldest daughter, CEO Hyewon Choi, has been serving as CEO of Hyungji I&C since 2016.

However, the transfer of Chairman Choi's shares has not yet taken place. The succession structure will be determined by how Chairman Choi allocates his shares between his two children. Born in 1953, Chairman Choi is 72 years old this year. Given his advanced age, the industry expects the share transfer to occur soon.

However, as Chairman Choi remains active as chairman of the Korea Federation of Textile Industries and vice chairman of the Korea Employers Federation, and since key decisions within the group are still made through him, it is difficult to predict the specific timing. An industry insider commented, "It is expected that Vice Chairman Choi will lead the next generation of Hyungji," adding, "It appears that Chairman Choi is currently evaluating Vice Chairman Choi's management capabilities."