Five Tong Yang Group units go under court receivership

Five affiliates of troubled Tong Yang Group won court protection Thursday to cope with liquidity crisis, court officials said.

The move comes after the country's 38th-largest conglomerate filed for court receivership for five of its units – Tongyang Inc., Tongyang Leisure Co., Tongyang International Inc., Tongyang Cement & Energy Co. and Tongyang Networks Corp. -- on Sept. 30 and Oct. 1 after it failed to pay back maturing short-term debts worth some 110 billion won (US$103.1 million) in time.

The bankruptcy division of the Seoul Central District Court accepted applications for court receivership and appointed chief restructuring officers, they said.

The liquidity shortage has so far left tens of thousands of individual investors who bought the firm's bonds on the verge of losing their money, prompting a prosecution probe for alleged financial fraud into the group's chairman, Hyun Jae-hyun.

Hyun is accused of issuing some 156.9 billion won worth of asset-backed commercial papers (ABCPs), a type of short-term debt, in July and September, even with prior knowledge that the firm had lost its ability to pay back its debts and was on the verge of coming under court receivership.

Two-thirds of such debts were floated with assets of Tongyang Cement & Energy Co. as collateral and sold to a lot of investors last month, up until two weeks before the group filed for court receivership.

The group's labor union argued that Hyun had misled the investors into buying such assets with no warning of its crippling finances. It further alleged that retail investors who bought the ABCPs of Tongyang Cement & Energy will likely suffer massive losses. (Yonhap News)