Brand Refactoring Questions Na Wonkyun's Obstruction of Shareholder Normalization... Submits Rehabilitation Plan with Shareholder and Creditor Consent

With Dong Sung Pharmaceutical's rehabilitation process at a critical juncture, the largest shareholder, Brand Refactoring, announced on the 27th that it had submitted a shareholder rehabilitation plan to the bankruptcy court with the consent of a majority of shareholders and creditors. Attention is now focused on whether the creditors and shareholders will approve this plan.

A representative from Brand Refactoring explained, "According to the audit report, Dong Sung Pharmaceutical has assets of 168.8 billion won and liabilities of 112.6 billion won, resulting in a surplus of more than 56 billion won. Even the investigation report during the rehabilitation process shows that the company has a surplus of over 40 billion won, indicating its soundness. Despite entering rehabilitation proceedings, sales remain robust, and revenue from Amazon in the United States is on the rise."

The representative continued, "Dong Sung Pharmaceutical will be normalized simply by removing the previous management, including former CEO Lee Yanggu and Lee Kyunghee, who are family members of court-appointed administrator Na Wonkyun and were responsible for poor management. Under the previous management, as much as 20.3 billion won was siphoned off through related parties. The new management can achieve profitability immediately by simply reducing the unfair fees paid to these affiliated companies."

Brand Refactoring also questioned why administrator Na Wonkyun is insisting on transferring Dong Sung Pharmaceutical to a third party, even though shareholders wish to revamp management with a new major shareholder. They expressed doubt as to why he is pushing for this, given that his own shares would also be diluted in a pre-approval M&A, just like those of existing shareholders.

The Brand Refactoring representative said, "In other rehabilitation cases, major shareholders make every effort to pursue a going-concern rehabilitation plan, and if the plan is not approved, they supplement the documents and reapply for a going-concern rehabilitation. In contrast, administrator Na Wonkyun is not requesting the termination of the rehabilitation proceedings but is instead immediately pursuing a pre-approval M&A. In conclusion, Na Wonkyun did not file for rehabilitation to protect the value of his shares through conventional means, but rather to defend his management control. In the process, he is seeking to maintain control by bringing in external financial investors," the representative criticized.

They further speculated that the reason for pursuing a pre-approval M&A through a stalking horse method, which grants a clear acquisition priority rather than a public sale, is also due to these motives. They strongly suspect that administrator Na Wonkyun has entered into a stalking horse agreement with an acquirer who guarantees his management control. If this were not the case, after the rehabilitation ends, Na Wonkyun would have no legal rights and would actually incur losses, so there would be no reason for him to vehemently oppose the shareholders' rehabilitation plan, which does not dilute shareholder equity.

The Brand Refactoring representative stated, "The structural interests at play are not about the public purpose of corporate rehabilitation, but rather about a structure that benefits only the administrator. If the pre-approval M&A is successful, the administrator retains procedural control and secures substantial benefits such as success fees and incentives. However, if the going-concern rehabilitation plan passes, the administrator receives no economic compensation."

They also speculated that if the shareholder rehabilitation plan is approved, the new management is highly likely to investigate the previous management and hold them civilly and criminally liable, which would further motivate the administrator to oppose the plan for the sake of opposition. They pointed out that the administrator has taken no action regarding the finalized damage compensation judgment against the former executives, which was already documented in the investigation committee's report, as evidence of this.

The Brand Refactoring representative added, "In fact, internal auditor Ko Chantae has already filed criminal complaints against the former management for embezzlement and breach of trust, and the key issues surrounding the liquidity crisis and allegations of intentional default remain unresolved. If Dong Sung Pharmaceutical is sold to a financial investor, past responsibilities are likely to be diluted under the name of restructuring, the substance of the case will become blurred, and existing shareholders will be the only ones to suffer unilateral damage in this process."