By Kim Bo-eun
Kyobo Life Insurance is seeking to settle its years-long conflict with financial investors, as its initial public offering (IPO) is only months away, but the feud is instead escalating, posing uncertainties for the company's stock market debut.
A local court handed a provisional attachment order for Kyobo Life Insurance Chairman Shin Chang-jae's real estate assets last week, upholding a filing by the consortium of financial investors led by Affinity Equity Partners. A provisional attachment order is a judicial measure available to those who have a monetary claim to freeze certain assets to restrain a debtor from dissipating their assets in an attempt to frustrate a potential judgment.
Affinity stated the court order recognized that the investors could exercise their put option, and that because Shin had duties he was not executing, investors had the right to withdraw their investments through the put option via a second arbitration. A put option gives a shareholder the right to sell an asset at a specified price by a specified date to the writer of the put.
In 2012, Shin signed a contract with the consortium which included a put option. The contract stated the consortium of investors could exercise the put option if Kyobo Life were to fail to go public within three years.
Kyobo failed to carry out an IPO within the specified time frame and the investors exercised the put option on Oct. 23, 2018. The consortium presented a value of 409,912 won ($344) for Kyobo's stock at the time, but Shin refused to honor the put option, taking issue with the contract.
The consortium filed for mediation with the International Council for Commercial Arbitration in March 2019, which concluded it was valid for the consortium to exercise the put option, but stated the consortium's valuation of 409,912 won per share couldn't be accepted.
In January 2021, the prosecution indicted Deloitte Anjin accountants and employees affiliated with the consortium on allegations of violating the law by inflating the value of Kyobo Life's shares. Prosecutors have sought a jail term for them.
Shin and Kyobo are seeking for the consortium to withdraw its investments by selling its shares in the company according to market prices after its IPO. But the ongoing dispute between Shin, the largest shareholder, and a major investor could possibly affect authorities' approval of Kyobo's IPO, which is currently undergoing a preliminary review by the Korea Exchange.
The Affinity-led consortium is against the idea of redeeming its investment by selling the stocks after Kyobo's IPO, because Kyobo is unlikely to attain a valuation that would enable the consortium to reap a greater profit than if it had sold the shares at 409,912 won, given the current tough market circumstances for life insurers. If Kyobo proceeds with its IPO with the conflict unresolved, this would likely have a negative effect on the company's valuation as well.
The consortium is known to be seeking a second filing with the International Council for Commercial Arbitration.
Kyobo dismissed any implications of the court's recent order to have Shin's assets frozen.
"The value of the provisional attachment order is largely short of the debt the consortium is claiming," a Kyobo Life official said. "We can only see this as the consortium's means to obstruct Kyobo's IPO."
The order was made 17 days after the court dismissed an injunction by the consortium for the put option to be executed and withdrew an earlier provisional attachment order on Shin's assets.
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| Kyobo Life Insurance Chairman Shin Chang-jae / Courtesy of Kyobo Life Insurance |
A local court handed a provisional attachment order for Kyobo Life Insurance Chairman Shin Chang-jae's real estate assets last week, upholding a filing by the consortium of financial investors led by Affinity Equity Partners. A provisional attachment order is a judicial measure available to those who have a monetary claim to freeze certain assets to restrain a debtor from dissipating their assets in an attempt to frustrate a potential judgment.
Affinity stated the court order recognized that the investors could exercise their put option, and that because Shin had duties he was not executing, investors had the right to withdraw their investments through the put option via a second arbitration. A put option gives a shareholder the right to sell an asset at a specified price by a specified date to the writer of the put.
In 2012, Shin signed a contract with the consortium which included a put option. The contract stated the consortium of investors could exercise the put option if Kyobo Life were to fail to go public within three years.
Kyobo failed to carry out an IPO within the specified time frame and the investors exercised the put option on Oct. 23, 2018. The consortium presented a value of 409,912 won ($344) for Kyobo's stock at the time, but Shin refused to honor the put option, taking issue with the contract.
The consortium filed for mediation with the International Council for Commercial Arbitration in March 2019, which concluded it was valid for the consortium to exercise the put option, but stated the consortium's valuation of 409,912 won per share couldn't be accepted.
In January 2021, the prosecution indicted Deloitte Anjin accountants and employees affiliated with the consortium on allegations of violating the law by inflating the value of Kyobo Life's shares. Prosecutors have sought a jail term for them.
Shin and Kyobo are seeking for the consortium to withdraw its investments by selling its shares in the company according to market prices after its IPO. But the ongoing dispute between Shin, the largest shareholder, and a major investor could possibly affect authorities' approval of Kyobo's IPO, which is currently undergoing a preliminary review by the Korea Exchange.
The Affinity-led consortium is against the idea of redeeming its investment by selling the stocks after Kyobo's IPO, because Kyobo is unlikely to attain a valuation that would enable the consortium to reap a greater profit than if it had sold the shares at 409,912 won, given the current tough market circumstances for life insurers. If Kyobo proceeds with its IPO with the conflict unresolved, this would likely have a negative effect on the company's valuation as well.
The consortium is known to be seeking a second filing with the International Council for Commercial Arbitration.
Kyobo dismissed any implications of the court's recent order to have Shin's assets frozen.
"The value of the provisional attachment order is largely short of the debt the consortium is claiming," a Kyobo Life official said. "We can only see this as the consortium's means to obstruct Kyobo's IPO."
The order was made 17 days after the court dismissed an injunction by the consortium for the put option to be executed and withdrew an earlier provisional attachment order on Shin's assets.
