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| Kyobo Life Insurance Chairman Shin Chang-jae |
By Jhoo Dong-chan
A tug of war between Kyobo Life chief and the insurer's investors has reignited since the latter called recently for arbitration with the Korean Commercial Arbitration Board (KCAB) to exercise their put option.
Kyobo Life Insurance Chairman Shin Chang-jae, who has sought a breakthrough, immediately expressed his regret about the investors' decision while urging them to come back to the negotiation table before the matter crosses the point of no return.
A put option is a stock market device that gives the owner the right to sell an asset at a specified price by a predetermined date to a given party. Since October, Shin has negotiated with the insurer's investors who want to exercise a put option after Kyobo decided not to go public after years.
Last week, Shin suggested in a press release that the insurer will issue asset-backed securities (ABS) while allowing its investors to sell their shares to third parties.
ABS is a bond or note collateralized by a pool of assets such as loans, leases, credit card debt, royalties or receivables. It is also an alternative to investing in corporate debt for investors. For ABS, the insurer will issue new bonds backed by the investors' shares and return them with the proceeds of the bond sales.
Shin displayed his disappointment about the investors' decision, but requested reconsideration to settle the difference before taking the issue to the KCAB.
"Kyobo Life is an insurer with 4,000 workers as well as 16,000 insurance consultants. Its policyholders are now totaled at over 5 million. It will be a great loss if we neglect the firm's 60-year history and its social value," Shin said in a press release.
"I decided not to go public because a hasty initial public offering (IPO) could jeopardize Kyobo's future. It was an inevitable decision as a CEO. I believe the investors all understand the circumstances. There's still room for second thoughts."
In 2012, the Kyobo Life investor consortium, including SC Private Equity and IMM PE, acquired a 24 percent stake in the insurer from the company then called Daewoo International for 1.2 trillion won ($1.06 billion). They also included a put option to resell the 24 percent stake to Shin if Kyobo Life did not go public before 2015.
Since the insurer had not submitted an IPO application by 2015, the investors informed Kyobo they would want to exercise the put option selling their stake to Shin.
They also requested Deloitte Korea to calculate the total value of their 4.92 million shares. The accounting firm set 409,000 won per share, meaning Shin needs to pay 2.12 trillion won if they exercise the put option.
Claiming the investors' calculation was too high, Kyobo assigned NH Investment & Securities and Credit Suisse to evaluate the 4.92 million shares.
The two firms said it is worth about 200,000 won per share. The figure is even less than the investors' initial investment value.
