#79 The Fall of Hyeonbo Group.
“Did you rest well?”
“Yes, Grandfather.”
My grandfather welcomed me warmly upon my return from Busan.
“I heard Chairman Jang paid a visit?”
“Yes. Just as you said, he came asking to borrow money.”
“He must be in a hurry. Last time, he acted as if he'd never see us again.”
I gave a slight smile. Grandfather shook his head.
“His money lines are already cut off; it's a sinking ship. The other conglomerates are probably discussing what they can devour once Hyeonbo collapses. A pack of hyenas. Tsk.”
“Hyeonbo is just the beginning. Ilseong, and of course Daehyun Group, won't be safe either.”
“Ho ho. If what you say is true, it means the country's economy will completely collapse.... I can't not believe you now.”
“It's a side effect of rapid growth. Something like this was bound to happen sooner or later.”
“Yes, I suppose so.”
After his inauguration, the president pushed for reforms like the dismantling of Hana-hoe and received the full support of the people, but after a series of incidents and accidents resulted in massive casualties, he was being mocked for turning the country into a republic of accidents.
Undeterred, he sought to rebound his approval ratings by passionately promoting the country's entry into the OECD in 1996 and achieving a GDP of ten thousand dollars per capita.
But behind it all was an absurd time bomb: a current account deficit of 39 billion dollars, a short-term foreign debt to foreign reserve ratio of 211%, and an average debt ratio of 317% in the manufacturing sector. Whatever it was, it was on the verge of exploding.
“Grandfather, this is just the beginning.”
History flowed just as I knew it would.* * On January 6, Chairman Jang of Hyeonbo Group attempted to put out the urgent fire by issuing 45 billion won in convertible bonds. However, due to bad news such as the stock market crash the next day, he did not succeed. On January 9, unable to cover a 120 billion won promissory note, they were on the verge of default. Still, they overcame the crisis with an emergency loan from the bank. Afterward, he tried to secure funds by putting his real estate on the market, but there was no way over 300 billion won worth of property would sell at once. He tried to issue another 35 billion won in convertible bonds, but no one was willing to buy them. He even tried contacting the house in Pyeongchang District, but was rejected. Hyeonbo pretended to enter an emergency mode by replacing its executives and continued to ask the banks and the government for help. The 50 billion won promissory note due on the 17th was also covered with the bank's help, but the bomb didn't stop there. On January 20, Chairman Jang once again requested 300 billion won in support, but the creditor groups refused. “Chairman. Step down from management. If you do, we'll find a way to keep the company alive.” “We've already saved you twice. We can't support you any further. So just give up your management rights.” The creditor groups' demand was simple. For Chairman Jang's family to give up their management rights. With the presidential election this year, the ruling party and the government could be embroiled in accusations of preferential treatment. If Chairman Jang's family just gave up their management rights, they planned to normalize the company through an emergency cash injection. But Chairman Jang held his subcontractors and partner companies hostage and acted defiantly. Too big to fail. His actions stemmed from the belief that the government would never just stand by and watch Hyeonbo Group go bankrupt. Chairman Jang knew that the creditors alone had lent him trillions of won. “If you just provide 300 billion won in support, there will be no problem normalizing the company again. You know that I've already put the real estate on the market and am trying to continue issuing convertible bonds, don't you? Just help me one more time. I'll make it worth your while.” However, the creditor groups and Chairman Jang ultimately failed to reach an agreement, and the negotiations broke down. “Stupid bastards. If Hyeonbo falls, this country falls. Hey! Let's go to Pyeongchang District, quickly.” He took his anger out on the innocent driver and headed for Pyeongchang District. He intended to persuade Chairman Cheon somehow and borrow money. Even in that situation, the thought of going bankrupt never crossed Chairman Jang's mind. ‘How do I persuade Chairman Cheon?’ * “Will you meet with him?” “Yes, I'll handle it.” “Alright, I understand.” Grandfather left the meeting with Chairman Jang to me. A moment later. Hearing that Chairman Jang had arrived, I came out of the study. “It's been a while, Chairman Jang.” “Ah, you were here too? Is the Chairman inside?” “He is not feeling well. You can speak with me. I have been given full authority.” “Hmph....” Chairman Jang's pride seemed hurt as he furrowed his brow. He still hasn't grasped the situation. I smiled nonchalantly. “Let's go to the drawing room.” I led him to the drawing room, not the study. We sat facing each other, just the two of us, without even Manager Ha. “What would you like for tea?” “...Manager Ha isn't here either?” “Did I not tell you that I have been given full authority? If you have no intention of talking, you may leave now.” My firm tone made Chairman Jang's expression sour even more. Still, he was the one in a desperate position. He didn't get up from his seat. “If you're not planning to leave, let's get straight to the point. We have no intention of acquiring your convertible bonds. Hyeonbo's stock is already worth less than scrap paper.” “What? Do you think you can say whatever you want?” “I understand your negotiations with the creditor groups have also broken down. Do you have the money to cover the 5 billion won promissory note due on the 23rd?” Hyeonbo Group, ranked 14th in the business world, would be unable to cover the 5 billion won promissory note due for Hyeonbo Steel and would ultimately go bankrupt after signing a stock waiver. But 5 billion was just the beginning. The debt Hyeonbo Steel owed was a staggering 5 trillion won. “The bank will take care of that. That's not the urgent matter.” “Yes, so offer something else. Something other than convertible bonds.” “Is there something you want? Just say it.” The only thing worth taking from Hyeonbo was its real estate. The prime pieces of land across the country owned by Hyeonbo Construction. “The total value of the properties you've put on the market is 310 billion won, correct?” “Yes, will you buy them?” “Not at full price.” Chairman Jang's face contorted. “Look here, young man.” “Two hundred billion. We sign the contract, and payment will be made on February 1st. If you're not interested, we can consider the negotiations over.” The banks had already dumped all their Hyeonbo-related stocks on the market. The stock price was plummeting with no end in sight. The stock showed a brief rebound with the completion of the Dangjin steel mill, but it wasn't enough to absorb the volume sold by the banks. “...Offer a bit more.” “Right now, no one is willing to lend money to Hyeonbo, buy its bonds, or purchase its land. The Federation of Korean Industries? They're probably negotiating how to carve Hyeonbo up once it collapses. You know this, don't you?” At my words, Chairman Jang bit his lip hard. He couldn't refute it. Before coming here, he must have already asked other conglomerates for help, but there was no way those hyena-like corporations would help him willingly. At best, they would have told him to hand over his affiliates for a ridiculously low price. His insides must have been churning. “Hoo....” Chairman Jang's long sigh sounded like a surrender to me. After the bankruptcy, I would have to fight with many competitors to buy that land. Because that was the only thing worth taking from Hyeonbo. In the end, Chairman Jang raised both hands. “Alright, let's make a deal. But you must pay by February 1st.” “Understood. You're aware of the Pyeongchang District's credibility, aren't you?” I smiled calmly. If the company goes bankrupt after the sales contract is signed, the money just has to be handed over to the creditor groups. Chairman Jang wouldn't be able to take a single penny. I had Section Chief Ma bring the contract I had prepared in advance. “Huh.... You had this prepared in advance?” “Because this was the last chance.” He held up the contract and examined it for a long while. “There shouldn't be any problems. It's a contract that Yoon & Jang personally reviewed. We just need to write in the amount and sign.” Soon, Chairman Jang signed the contract. After I signed as well, we each took a copy. “Thank you for the good deal.” “I'm counting on a swift payment.” “Understood. I'll prepare it as quickly as possible and make the payment by February 1st.” The party to the contract was not Chairman Jang, but Hyeonbo Corporation. It was a contract that expert lawyers had revised several times to ensure there would be no problems even if the company went bankrupt and Chairman Jang was arrested. “It was a good deal, Chairman Jang. I'll see you next time with a smile.” “Alright. Let's meet again after I put out this fire.” As Chairman Jang left with my farewell, his back showed no signs of being daunted. ‘I'm looking forward to three days from now.’ “Young Master, the Chairman is waiting.” “Yes, let's go.” At Manager Ha's words, I entered the study where Grandfather was waiting.“ He looked pleased on his way out. What did you decide?” “I've decided to buy the real estate. The market price is around 300 billion, but I signed a sales contract for 200 billion. If Hyeonbo goes bankrupt between the 23rd and the 25th, I plan to take it after speaking with the creditor groups.” I explained the details of my conversation with Chairman Jang to my grandfather.Grandfather smiled the entire time he listened.“ Well done. Land never disappoints.” “Because that's the only thing worth taking.” Grandfather nodded and continued.“ If Hyeonbo goes bankrupt, I can't imagine what will happen next. The banks will be hit hard.” “There will be a string of bankruptcies.” “This is a big problem.” It was a big problem, just as Grandfather said, but no one else thought so.On January 23rd, Hyeonbo Steel was unable to cover its 5 billion won promissory note. In the end, Chairman Jang signed the stock waiver, and the company was declared bankrupt.It was the price for not complying with the creditor groups' demands. The government, wary of being embroiled in accusations of preferential treatment in a presidential election year, could no longer provide support. It was the first bankruptcy of a corporate group since Kukje Group was forcibly dismantled after falling out of favor with the regime. And on the 25th, the entire Hyeonbo Group, including Hyeonbo Corporation, was declared bankrupt. The day before Hyeonbo was declared bankrupt, I went to see Chairman Song of Daehyun Group. “Don't get greedy with Hyeonbo, Chairman.” “What?” “Aren't you coveting Hyeonbo Steel?” “Hah... you rascal, you see right through me.” “The moment you try to devour it, Daehyun Group will be in danger too. It's a poisoned frog.” Seeing Chairman Song looking contemplative, I delivered the final blow. “I've already signed sales contracts for all the land owned by Hyeonbo Steel and Hyeonbo Construction. There will be nothing left to take.” “What? Is that true?” “Yes.” “You little rascal. Why did you buy it? It was something we could have gotten for free.” The thinking of the conglomerate chairmen was simple. Once Hyeonbo went bankrupt, they would negotiate with the government to acquire the company, write off the debt, and then tear apart and sell off all the valuable assets. Of course, they planned to pay the acquisition cost with a loan from the bank. Such absurd things were commonplace in the Republic of Korea of 1997. “There would have been a lot of competitors then. I didn't make a contract with Chairman Jang, but with the company itself. I just need to delay the payment until February 1st. The bankruptcy is unavoidable. I know you still have your eyes on the Dangjin steel mill, but Hyeonbo is also dangerous.” “...Who else knows about this?” “Besides the people in Pyeongchang District, you're the only one I've told.” “Don't you dare say a word about this to anyone.” “I have no one to tell.” A mischievous look appeared on Chairman Song's face. He was probably planning to pretend to compete with Chairman Seo of Ilseong, only to pass it on to Ilseong at a high price. My prediction was spot on. * *The Federation of Korean Industries held an emergency meeting regarding the Hyeonbo Group's bankruptcy.
It was a gathering of the formidable chairmen of the top 20 companies in the business world. The only point of contention was who would eat what. Not a single person was worried about Hyeonbo Group's bankruptcy.
Regardless of who took the smaller pieces, the top-ranking conglomerates, Daehyun Group, Ilseong, and Jungwoo Group, were engaged in a sharp discussion over the most lucrative parts: Hyeonbo Construction and Hyeonbo Steel.
“Daehyun Group should yield, Chairman Song. You've already retired from the front lines, so where is your son? Why did you come yourself?”
“Ahem, you there. Your words are too harsh.”
“Your era is over, Chairman.”
Those were the words of Chairman Seo Yong-geon of Ilseong Group. Chairman Song was laughing inwardly, but on the outside, he pretended to be angry.
“You brat! I am Song Yeong-ju of Daehyun Group. The man who supported the economy of the Republic of Korea alongside your father.”
“Yes, I know. So please step back now. Chairman Park and I will divide Hyeonbo between us.”
“Hah....”
Chairman Song looked at the two of them with a baffled expression and thought to himself.
‘Mu-hyeok, you cute rascal.’
In the end, the emergency meeting that day concluded with Ilseong Group taking Hyeonbo Construction and Jungwoo Group taking Hyeonbo Steel.
“You all will regret this. I won't back down this easily. Fine, let's settle this with money.”
Chairman Song's threat would ultimately become a burden for Ilseong and Jungwoo. Meanwhile, at that very moment, Kim Mu-hyeok was boarding a plane to Hong Kong.
< The Fall of Hyeonbo Group. > End