After a management dispute between an uncle and a nephew, Dong Sung Bio Pharm applied for corporate rehabilitation, leading to the suspension of stock transactions. Sangsangin Savings Bank has invested 20 billion won in Dong Sung Bio Pharm but finds itself in a difficult situation. In February, Dong Sung Bio Pharm issued convertible bonds (CB) to Sangsangin Savings Bank, but just three months later, it applied for corporate rehabilitation in court, freezing creditors' funds.
Sangsangin Savings Bank and Sangsangin Plus Savings Bank announced on the 10th that Dong Sung Bio Pharm's equity stake has risen to 20.95%. In the case of Sangsangin Savings Bank, the total stock ownership ratio, combining CBs and bonds with warrants (BW), is 13.76%, while Sangsangin Plus Savings Bank holds 7.19% in CBs.
Although an equity announcement was made, Sangsangin Savings Bank did not acquire additional shares. This followed the occurrence of an event of default (EOD) for the debtor, Dong Sung Bio Pharm, which led to the acquisition of collateral rights. The 2.21 million shares (6.57%) of BW that Sangsangin Savings Bank newly holds through customer accounts are collateral rights.
EOD refers to the situation where the debtor is unable to repay interest or principal, or when the value of the collateral decreases, allowing the creditor to recover the loan amount before maturity.
Although Sangsangin Savings Bank obtained collateral rights, it is now in a situation where the recovery of its investment funds is uncertain. Dong Sung Bio Pharm applied for the initiation of a rehabilitation process at the Seoul Rehabilitation Court on May 7 and requested a comprehensive injunction and property preservation order, which the court accepted the next day.
On February 11, Sangsangin Savings Bank began investing by acquiring a CB worth 20 billion won from Dong Sung Bio Pharm. The company planned to use the procured funds for operations and debt repayment.
At the time, the business environment of Dong Sung Bio Pharm was poor, leading to accumulated losses, and as there were debts maturing, Sangsangin provided funding under quite favorable conditions. The nominal interest rate was set at 2.0% per annum, while the maturity interest rate was 8.0%. Dong Sung Bio Pharm's headquarters in Banghak-dong, Dobong-gu, Seoul, and its factory in Asan, Chungnam, provided the 33rd issue of BW as collateral.
The CB in question is also a catalyst for the management dispute within the Dong Sung Bio Pharm's ownership family. The second-generation owner, Lee Yang-gu, who suddenly teamed up with external investors after stepping down from management at the end of last year, has claimed that the financial situation of the company significantly worsened due to this funding while battling the current management represented by Na Won-gyun.
In an interview with a media outlet, Lee stated that he sold his equity stake to a marketing company called Brand Refactoring due to the situation where 'the management had issued a CB worth 20 billion won under unfavorable terms despite collateral.' He noted that 'a strong white knight was needed to normalize the company.'
However, considering that Chairman Lee Yang-gu gifted equity to Representative Na after the issuance of the CB, this claim appears somewhat less convincing. Chairman Lee and Representative Na disclosed planned transactions of shares (gifts) among parties with special relations in January, and the equity was actually gifted through an off-market sale on February 26, after the CB was issued.
The issuance of the CB was decided at a board meeting held on February 11, and the subscription and payment occurred two days later on the 13th. This raises the possibility that Chairman Lee was fully aware of the company's CB issuance when he gifted his equity stake.
The second-generation owner who stepped down from management described it as 'unfavorable funding conditions,' indicating that from Sangsangin's perspective, it was an investment with high expected returns. However, the company unexpectedly applied for corporate rehabilitation, freezing the investment funds.
Sangsangin Group, including Sangsangin Savings Bank, frequently utilizes investment methods that gain profits by acquiring convertible bonds (CB) from KOSDAQ-listed companies. In this regard, Sangsangin stated, 'We will follow the court's judgment regarding this investment.'