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(2nd LD) Hanjin Group to sell non-core assets for financial health

All News 17:46 February 07, 2020

(ATTN: ADDS Hanjin heiress' stance towards group's asset sale plan in paras 20-21)

SEOUL, Feb. 7 (Yonhap) -- Hanjin KAL Corp., the holding company of airline-to-logistics conglomerate Hanjin Group, said Friday it will sell non-core assets to improve its financial status and to focus on its mainstay airline business.

Hanjin KAL directors agreed to reorganize its money-losing hotel and leisure business and sell low-profit, non-core businesses, while focusing on strengthening competitiveness of the core airline and logistics business, and enhancing shareholder value, the company said in a statement.

They decided to sell the Paradise Hotel in Seogwipo, Jeju Island, while reviewing profitability of the other three hotels for possible liquidation, the statement said.

This undated file photo provided by Hanjin Group shows the Jeju Paradise Hotel on Jeju Island. (PHOTO NOT FOR SALE) (Yonhap)

The three hotels are the Jeju KAL Hotel and the Seogwipo KAL Hotel on Jeju Island, and the Grand Hyatt Incheon near Incheon International Airport, west of Seoul.

KAL Hotel Network, an affiliate of Hanjin KAL, has operated the four hotels and posted net losses each year since 2015.

Hanjin Group's Los Angeles-based Wilshire Grand Center that includes an Intercontinental Hotel will also be put into consideration for sale, the statement said.

Hanjin KAL also agreed that the board of directors will have the rights to select the representative of directors. Previously, the Hanjin Group chairman was selected to serve as representative director.

The move is part of Hanjin Group's efforts to improve its governance structure and shareholders' value, the company said.

On Thursday, Korean Air Lines Co., the flagship unit of Hanjin Group, held a board meeting to make similar decisions.

The national flag carrier said it aims to sell its land and building in Songhyeon-dong and an entire 100 percent stake in Wangsan Leisure Development Co., a leisure company that operates the Wangsan Marina resort in Incheon, 40 kilometers west of Seoul, within this year.

Korean Air purchased the Songhyeon-dong site from Samsung Life Insurance Co. in 2009 and planned to develop a cultural complex.

But the development project faced multiple development challenges, such as building height restrictions and cultural asset preservation as the land is located near the presidential office of Cheong Wa Dae and Gyeongbok Palace, one of the country's most valuable cultural assets.

The board also agreed to establish a governance committee to improve the transparency of its governance structure. The committee will review and make recommendations about the company's key management decisions.

The move comes as the Hanjin Group family is divided over the airline-focused conglomerate's management control ahead of a shareholders meeting next month.

Cho Hyun-ah, 45, the heiress of Hanjin Group, widely known for the "nut rage" incident in 2014, has recently joined hands with the Korea Corporate Governance Improvement (KCGI), a local activist fund, and the midsized builder Bando Engineering & Construction Co. to invite a professional manager to improve the group's management, financial status and shareholder value.

Her 44-year-old brother Won-tae currently serves as chairman of Hanjin Group and Korean Air after he was appointed to the top post in April following his father's death. His reappointment as chairman is subject to shareholders' approval next month.

In response to Hyun-ah's alliance with the KCGI and Bando, her mother Lee Myung-hee and younger sister Hyun-min, 37, said in a statement they stand against Hyun-ah's approach.

"We support the current management structure headed by Chairman Cho Won-tae and hope the current management will make its best efforts to enhance financial health and shareholders' value," the statement said.

They also asked Hyun-ah to come back as a member of the Hanjin family and join forces to promote the group's stability and development.

On Friday, Hyun-ah released a statement through her legal counsel criticizing the group's plans to sell non-core assets and strengthen its core airline business.

"The decision to sell the Songhyeong-dong site was already included in the group's plans to regain financial health at the request of KCGI in early 2019. And the plan to strengthen the main airline business lacks in any specific action plan," the statement said.

Songhyeon-dong in central Seoul (Yonhap)

Hanjin KAL released its 2019 earnings results on Friday. Its net losses deepened to 255.8 billion won last year from 17.7 billion won a year earlier.

Last week, Korean Air also reported its net losses widened to 624.87 billion won last year from 185.65 billion won a year ago.

Foreign exchange losses resulting from the won's weakness against the dollar and lower demand on Japanese and Hong Kong routes mainly affected the bottom line, the company said.

The national flag carrier expects the impact of the spreading coronavirus outbreak will deal a blow to its first-quarter earnings if the crisis prolongs without the virus being contained.

On Friday, Hanjin KAL fell 0.5 percent to 41,300 won and Korean Air declined 0.4 percent to 26,900 won, in line with the broader KOSPI's 0.7 percent loss.

kyongae.choi@yna.co.kr
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