The chief of Tongyang Group apologized on Thursday over its affiliates' filings for court receivership, promising to redeem debts owed to retail investors.
Five affiliates of Tongyang Group, the country's 38th-largest family-controlled conglomerate, have requested a Seoul court to shield their assets and properties. The request came after they failed to secure enough funds to repay maturing debts worth 110 billion won(US$102 million) by the end of last month.
"I apologized over the current situation," Tongyang chairman Hyun Jae-hyun said in a emailed statement. "It's all my fault...and redemption of commercial papers would be possible through sales of assets."
Retail investors who bought so-called commercial papers backed by assets of Tongyang Cement & Energy Co. are feared to suffer massive losses.
Investors even raised suspicions that the group had cheated them into buying such assets with no warning of the crippling finances.
In July and September, Tongyang Inc., the de facto holding company of the group, issued some 156.9 billion won worth of asset-backed commercial papers (ABCPs), a type of short-term debts, via a special purpose company it set up to raise money, according to brokerage sources.
Two-thirds of such debts were floated with assets of Tongyang Cement & Energy as collateral and sold to a lot of investors last month, up until two weeks before the 38th-largest conglomerate filed for court receivership of three of its units on Sept. 30.