Sovereign may dump SK Corp stake if bails out SK Global

15 May 2003 10:18  [Source: ICIS news]

SINGAPORE (CNI)--Sovereign Asset Management has threatened to sell all or part of its 14.99% holding in major South Korean refiner and petrochemical producer SK Corp if the company bails out its troubled trading arm affiliate SK Global.

The company, in a statement issued from its Monaco headquarters, said that if SK Corp continues its past practices - despite its promise to break with history and adopt greater transparency - then Sovereign's wholly owned Crest Securities unit may be obliged to divest all or part of its shareholding.

The announcement followed a statement by an SK Corp executive late last week that the firm was considering options to save SK Global, including a costly debt-for-equity swap.

Sovereign said this statement contradicted an earlier SK Corp pledge to establish world-class corporate governance and transparent management led by the board of directors in order to maximise shareholder’s value. Any bailout of SK Global or other units would badly hurt SK Corp's share price.

Sovereign said the management and the board of directors of SK Corp have a duty to clarify the company's position on SK Global publicly.

SK Corp released a brief statement that it would deal with the financial problems of SK Global based on shareholder interests after the completion of due diligence by creditors is completed in mid-June.

The company said it will do its best to enhance its value to shareholders, creditors and customers and to strengthen management transparency.

At the end of last month, Sovereign warned that SK Corp should not support SK Global or other troubled SK Group units. Sovereign acquired a 14.99% stake in SK Corp in March and April, sparking speculation that it was mounting a hostile takeover.

SK Global is under investigation for misreporting losses of about Won2trn ($1.67bn/Euro1.44bn). The company's debt exceeded its assets by Won212.8bn at end-2002. It revised its 2002 results to a loss of Won296.7bn from a profit of Won194.2bn.

Standard and Poor's (S&P) last week cut SK Corp's debt rating to junk status on fears that it would increase its exposure to SK Global.

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