On Friday 18 July, the creditors of SK Global failed to present a bailout plan under the terms of the Korean Corporate Restructuring Promotion Act. SK Corp shareholders, employees and now foreign creditors have all come to the conclusion that a bailout of SK Global lacks commercial common sense and moral rectitude. Given SK Global's lack of viability, any attempt at a "pre-packaged" court receivership will also ultimately fail. It is time to end the months of uncertainty and move to liquidate SK Global in a professional manner.
SK Global Bailout Plan Lacked Commercial Sense After the 6 trillion won ($5 billion) accounting fraud, SK Global now has a negative net worth of 4.4 trillion won ($3.7 billion). Salvaging a company with falsified accounts, where management lacks legitimacy and where the creditors were reckless in their lending practices will only continue past abuses and is beyond credibility in a mature financial market. Moreover, the plan's prediction that new business with SK Telecom can increase tenfold, and that the company can support a debt burden ten times its operating cash flow, takes wishful thinking to the point of irresponsibility.
SK Corp Bailout Preconditions Were Not Met At the last board meeting of SK Corp on 15 June, the directors established six preconditions for supporting a bailout of SK Global. None of these preconditions have been met. In particular, SK Telecom has stated that it will not become involved in transfer pricing schemes. SK Corp's shareholders and employees have communicated to SK Corp's board their strong belief that a bailout destroys value for SK Corp and is not in the Company's interest. The SK Corp Board must now demonstrate that it will act in accordance with their fiduciary responsibility to the Company's shareholders.
There is No Future for SK Global SK Global will shortly be delisted and will be barred from issuing equity or debt in the foreseeable future. Its Hong Kong subsidiary has already filed for liquidation. Toyota has rescinded an important car distribution agreement. SK Global's foreign creditors have refused to participate in the bailout plan, citing its lack of transparency and failure to identify the causes of and responsibility for previous losses.
Time to Remove the Uncertainty It is time to confront the truth and remove the uncertainty for all employees, shareholders and creditors. Receivership is not a viable course of action and would merely prolong SK Global's agony, wasting time and effort for all involved. Liquidation now will allow both SK Corp and SK Telecom to get back to work creating long term value by focusing on their core businesses.
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