Scavengers and scratchers of value
As head of Dong Ah Securities until early this year Kim Young-chong earned something of a reputation as a soothsayer, issuing blunt early warnings about the cataclysm that was to hit Korea in late 1997.
The reward for his prescience was a dubious one. He was promoted to executive vice-president, international project development, at Dong Ah Construction Industrial Co, flagship of one the most troubled large chaebols (conglomerates). Dong Ah presently survives only by grace of the W1 trillion ($754 million) in emergency loans that the government has ordered the banks to advance it since late last year.
His title means little. Dong Ah's most important asset may be its $5 billion contract to build a huge irrigation scheme in Libya, but Kim's job is much closer to home: preparing a survival plan for a group currently in the throes of its second government bail-out in less than a decade.
Hit by scandal
Within weeks of taking up his new post, Kim was hit with a fresh problem. Choi Wun-suk, the group chairman and the man who had originally appointed him, was flung from office in the wake of an investigation into an alleged cash-skimming scandal. Kim now reports directly to the new chairman, the government appointed Koh Byung-woo, a former minister of construction.
Kim's first challenge is to reconstruct individual company accounts and assess the assets and liabilities of each firm on a stand-alone basis. The aim is to see if each firm could become viable on an independent basis within six months and categorize each company as ready for disposal, merger within the group, or total closure. Already Kim believes that all entities will require some restructuring or asset disposals.
"It is an extremely frustrating process, involving internal management challenges and coordination with the major banks," he says. Kim says he shares a basic problem with most external analysts of Korean corporations: getting accurate data. "There are questions about our management information systems," he says. "It is less a matter of obstruction than of inefficiency in financial management and accounting."
Kim says the group's creditors are of little help in disentangling the company's affairs and rebuilding them in a more coherent manner.
He also criticizes the "fly-in/fly-out" approach to Korea taken by most foreign investment bankers. Instead of trying to do business from Hong Kong or London they should emulate Rothschilds at the Halla Group, where the investment bankers have effectively set up camp within its head office as they advise on restructuring. Jack Lowenstein