The Genius Grandson of the Loan King - Chapter 92 (92/840)
< You might be in pain. >
You might be in pain.
The winner's curse.
Although DaeHyun Group successfully acquired Ashin Motors in the acquisition battle between IlSung Group and JungU Group, it ultimately faced a liquidity crisis in all its subsidiaries, including DaeHyun Motors, due to the cost of the acquisition.
"The winner's curse..."
"The acquisition cost is not the problem. The cost to normalize the company will be enormous. Especially, Ashin Motors has a very strong labor union, just like DaeHyun Motors."
I shook my head.
"To secure the flexibility of the labor market as required by the IMF, strong structural adjustments are necessary, which will inevitably lead to union resistance."
At that time, South Korea was an era where the concept of a lifetime job was taken for granted.
It was an era when, upon graduating from college, people were sought after by various companies.
To the point where, during interviews, people were given envelopes of money to encourage them to join their company rather than others.
However, under the harsh IMF economic system, the concept of a lifetime job disappeared.
"I did tell Chairman Song, but he probably won't want to miss this opportunity. After all, the choice is his."
"Tsk, what can we do. Cars are special to Chairman Song."
"Yes, I didn't think he would listen to my advice. If Ashin Motors were to be acquired by IlSung Group or JungU Group, DaeHyun's position as the top domestic car manufacturer could be at risk."
DaeHyun is currently the top domestic car manufacturer, but if it were to acquire Ashin Motors, it could cause a significant upheaval in the domestic car market.
It was more about maintaining the top position in domestic car market share rather than a necessity for Ashin Motors.
"Chairman Song will handle it himself. So, what do you plan to do now?"
In response to my grandfather's question, I smiled broadly and answered.
"I plan to acquire JungU Group."
My grandfather's eyes widened, as if he hadn't expected this.
* * *
The new year of 1998 arrived, but the atmosphere was not bright.
The government, in line with the IMF's demands, began to pressure large corporations by announcing the five principles of corporate restructuring as soon as the new year started.
In Seoul alone, over 100 companies went bankrupt in a single day.
The number of bankruptcies reached a record high, and many citizens lost their jobs overnight.
KBC Broadcasting Corporation launched a gold collection campaign.
Citizens voluntarily brought out their hidden rings and wedding jewelry to help overcome the foreign exchange crisis.
The government dispatched former Vice President Jeong Yong-in to the United States to negotiate short-term foreign debt for Korean companies and banks.
Under the leadership of JP Morgan, a method similar to what was used in Latin American countries in the 1980s was proposed, but other commercial and European banks strongly opposed it.
The reason was that South Korea was a completely different case from Latin American countries.
Ultimately, in 1998, the creditors' bank meeting was reconvened.
Special Envoy Jeong Yong-in visited the headquarters of JP Morgan.
After listening to the explanation of the negotiation proposal from Chairman Douglas and Executive Vice President Ernest, Special Envoy Jeong Yong-in spoke.
"President-elect Kim Hak-gwon has stated that he will fully comply with the conditions demanded by the IMF. We will reduce the overlapping investments and inefficient operations of large corporations through restructuring and make Korea an attractive country for investment."
Special Envoy Jeong Yong-in did not hastily accept the proposal offered by JP Morgan.
He could not afford to take actions that would burden the next administration during the transition of power, potentially shortening his political career.
However, this political move ultimately led to South Korea negotiating under unfavorable conditions.
Through three days of persistent negotiations, Special Envoy Jeong Yong-in managed to extend the maturity of short-term foreign debt by 90 days until the end of March, but no agreement was reached.
"JP Morgan's proposal is not suitable for Korea. And since we lent the money, why should JP Morgan lead the negotiations? We will handle it independently."
The meeting dragged on due to the opposition from commercial banks like Citibank and Chase Manhattan, which had lent a significant amount of money to South Korea.
"Why are you all so opposed? If we accept our proposal, we can recover half of the money that has flooded into Asia."
At Chairman Douglas's words, the JP Morgan executives sighed.
"Because we didn't lend much. It's different from Latin America. The scale of the national economy is different. Commercial banks don't want to lose their customers after the foreign exchange crisis."
"Damn. We can make billions in profit. Isn't there a way?"
The core members, including the JP Morgan chairman, held marathon meetings, but ultimately, to make a profit, they needed the cooperation of other banks. No solution was found.
In the end, the Korean foreign debt negotiations were transferred from JP Morgan to Citibank, the lead creditor bank.
Special Envoy Jeong Yong-in, who had a good understanding of the Wall Street atmosphere, called President-elect Kim Hak-gwon to explain the situation.
"Yes, Mr. President-elect. If we can properly utilize the conflicts in Wall Street, we can continue the negotiations as we wish."
— Is there a way?
"We need to hire Goldman Sachs and Salomon Smith Barney as advisory firms to support us from the outside. Especially, Goldman Sachs can exert significant influence through Minister Robert Rubin. It will be very helpful."
— Proceed with that. Also, tell them that DreamHigh Investment can acquire all the bonds if there is no proper agreement. It will put strong pressure on them.
"Yes? Mr. President-elect. Is that... discussed with DreamHigh?"
— We need to show some backbone. If it's impossible, we need to ask Han Kyung-eok for help, even if we offer special privileges. Show them that we have such a card. I trust you, Special Envoy Jeong.
"Understood."
After ending the call with Kim Hak-gwon, Special Envoy Jeong Yong-in knew the power of the new weapon he had been given.
He didn't fully understand it in Korea, but he felt it in New York.
The status of DreamHigh Investment and the name of its CEO, James Han.
The reopened foreign debt negotiations began at the headquarters of Citibank.
"Our government's proposal is as follows: We request that the maturity of short-term foreign debt due in 1998 be extended for a minimum of one year and a maximum of three years."
Just as opposition was about to arise, Jeong Yong-in added:
"If this proposal is not accepted, we will ask James Han of DreamHigh Investment to purchase all the short-term foreign debt held by financial institutions."
When James Han's name was mentioned in the foreign debt negotiation room, the creditor banks became anxious. If relations with South Korea soured, they could lose a major customer in the future.
To gain the upper hand, the creditor banks, who had been presenting their own proposals, ultimately accepted the South Korean government's proposal.
"Understood. If the South Korean government provides a guarantee, we will extend the maturity."
The negotiations, which had been dragging on due to pressure from the White House and the mention of James Han supporting the South Korean government, proceeded quickly.
"We will extend the maturity of short-term foreign debt for one to three years. In return, the interest rate will be adjusted proportionally to the international rate: 2.25% for one year, 2.5% for two years, and 2.75% for three years. Any objections?"
"No. We appreciate your understanding of our government's position. The South Korean government will accept this proposal."
The dramatically resolved agreement was immediately announced to the media and communicated to the creditor banks in various countries that had lent money to South Korea.
However, for the South Korean government, it was merely an extension of short-term foreign debt to medium and long-term.
The government was well aware that there was no future without proper new funds flowing into South Korea.
And the over $5 billion in short-term foreign debt held by large corporations was also a problem.
Ultimately, President-elect Kim Hak-gwon decided to meet with Han Kyung-eok again.
* * *
I arrived at the hotel where the transition committee was located with Han Kyung-eok, as per the agreement with President-elect Kim Hak-gwon.
"Please convey my gratitude to Chairman Cheon. Thanks to him, I received a report that large corporations were able to put out the urgent fire."
As soon as we greeted and sat down, President-elect Kim Hak-gwon expressed his gratitude to my grandfather.
"No, he said it was a good deal for him as well."
"It's something the banks couldn't do. It was a great help to the national economy."
"I'm glad it was helpful."
With a formal smile, I faced President-elect Kim Hak-gwon, who sighed.
"I misunderstood Chairman Cheon. I thought he was just a ruthless person who only played with money."
Indeed, his reaction was different from before.
Next, President-elect Kim Hak-gwon's gaze turned to Han Kyung-eok.
"Mr. Han, I need your help. We have extended the maturity of short-term foreign debt held by financial institutions with a government guarantee, but the problem is with the companies. I would like you to invest in them."
"Hmm..."
Han Kyung-eok, as I had instructed, did not answer immediately.
Seeing Han Kyung-eok's thoughtful expression, President-elect Kim Hak-gwon, who was anxious, spoke again.
"Special Envoy Jeong Yong-in, who is in the United States, told me about your status there. There are no people willing to invest in South Korea now. If this continues, not only large corporations but also the people might end up on the streets. If you help us now, I won't forget it."
"Mr. President-elect, I am an investor. I cannot invest out of sentiment. While I manage the funds, the investments must be understandable to my clients."
President-elect Kim Hak-gwon nodded heavily.
"I understand. But if you agree, they might consider it. If you help us this time, I will give your company many benefits."
"Understood. I will have a conversation with my clients and try to give a positive response."
"Thank you."
Although he did not get a definite answer, President-elect Kim Hak-gwon sighed in relief and leaned back on the sofa.
"I've been in politics for over 30 years to serve South Korea. It's sad that I have to take responsibility for such a crisis. Sigh..."
President-elect Kim Hak-gwon said with a dark expression.
"Mr. Han, what do you think of South Korea's future? Can we overcome this crisis and rise again? My advisors only give vague answers. Please be honest."
"Mu-hyuk knows better than me. I also receive a lot of help from Mu-hyuk regarding Korea."
"Is that so?"
Hearing Han Kyung-eok's words, President-elect Kim Hak-gwon turned his gaze to me.
"I want to hear your thoughts. Please share them."
"You might be in pain."
"I want to hear that. I always hear what I want to hear from my advisors and bureaucrats. Please be honest."
After a moment of thought, I finally spoke.
"Korea can overcome the IMF crisis faster than other countries. It won't be because the government or companies did well. The people will tighten their belts and work to pay off their debts voluntarily."
"Hehehe. Are you only saying good things?"
"While we will overcome the foreign exchange crisis through the sacrifice of the people... the fruits will be reaped by large corporations."
"What?"
I looked steadily at the surprised President-elect Kim Hak-gwon.
"The changed labor market, as required by the IMF, will demand sacrifices from the people. The power of the chaebols, revived with public funds and the strength of the people, will become stronger."
"Hmm..."
"This is the last chance. The last chance to break the ties between politics and business. What kind of president do you want to be remembered as, Mr. President-elect?"
"What kind of president..."
Seeing the serious expression of President-elect Kim Hak-gwon, I smiled meaningfully.