[NEWS IN FOCUS] Korean companies unloading assets to make good on big promises globally

Korean companies are unloading assets, from properties to shares, to raise much needed cash as rates rise and profits fall.

Busan City Gas put its headquarters and a nearby supermarket building up for sale to liquidate some of its assets. [JOONGANG PHOTO]

Korean companies are unloading assets, from properties to shares, to raise much needed cash as rates rise and profits fall.

Like many individuals, the country's biggest and best are being squeezed.

SK Inc. is under pressure as SK hynix, which makes memory chips, and SK On, which makes batteries, need billions of dollars for plants promised globally.

Busan City Gas, an SK Inc. subsidiary, sold a property in Busan — where the headquarters of Busan City Gas is located — for 632.8 billion won ($499.3 million), according to an electronics disclosure released Dec. 15.

The decision to sell it off to a local consortium is intended to “make efficient use of assets,” the release said.

“That is a part of corporate-wide efforts to secure cash reserves,” said a spokesperson at SK Inc.

The property, with 30,596 squares meters (7.6 acres) of land and 5,868 square meters of floor area, was 53.39 percent of Busan City Gas assets, and is a landmark building with a large discount supermarket and restaurants on Gwangalli Beach.

Selling the prime asset is in line with SK Inc. Chairman Chey Tae-won’s emphasis on belt tightening “to survive during rainy days."

SK Innovation, which owns all of SK On, executed a 2 trillion won ($1.6 billion) rights offering to fund the building of SK On’s overseas factories, the company announced last week.

SK On is constructing a new EV battery plant in Georgia, in the United States, and three more through a joint venture with Ford. Of the three factories, two will be built in Kentucky and one in Tennessee, with an aim of operating in 2025.

But the battery unit has struggled to fund the investments due to rising interest rates and a relatively short corporate history, as it was spun off from SK Innovation last October.

SK hynix set its capital expenditure guidance at around or below 10 trillion won, which is half of this year’s capital expenditure.

Noh Jong-won, chief marketing officer (CMO) at SK hynix, floated the possibility of unloading an asset in China for the first time during a conference call in October.

"If the time comes when it appears it is difficult to maintain operations of the fab in Wuxi, which is a contingency situation, we might have to sell the fab or equipment or bring in the equipment to Korea," Noh said.

The United States has issued a set of rules that would make it nearly impossible for companies to supply factories in China with technologies for the making of DRAM memory chips rated 18 nanometer or less and NAND flash memory chips with 128 layers or more.

The world’s second largest memory chipmaker is forecast to report a 419.2 billion won operating loss in the fourth quarter, according to FnGuide. It would be the company's first loss in a decade.

Naver divested 800,000 shares in Giantstep, a local content start-up, for 15.7 billion won in a block deal on Dec. 23.

The selling came after the company’s chief finance officer vowed to liquidate some of its assets especially for funding the debts incurred in the process of acquiring PoshMark, a U.S. online fashion commerce service.

“To reduce the increased debts, we will liquidate some of investment assets and secure cash through business operation,” said the CFO Kim Nam-sun in October.

In retail, Hyundai Home Shopping sold off an 80 percent stake in Hyundai Rental Care for 137 billion won to a private equity firm. It will hold the remaining 20 percent, but will no longer have control of the company.

Hyundai Home Shopping explained that the selling is intended to focus on businesses with high growth potential.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]