This article was published on Jan. 24, 2025, at 4:18 p.m. on the ChosunBiz MoneyMove site.
Shin Chang-jae, chairman of Kyobo Life Insurance, has delayed submitting a report containing the exercise price of the put option (stock purchase right). This delay appears to be due to the fact that interest will accrue as soon as the exercise price is determined. According to an international arbitration ruling, the deadline for Chairman Shin to submit the evaluation report was the 22nd. However, it has been confirmed that Shin's side notified the Affinity Equity Partners consortium that the submission of the evaluation report would be delayed, leaving the submission date as "blank."
On the 24th, according to sources in the investment banking (IB) sector, Chairman Shin's side informed the Affinity consortium that EY Han-young would be selected as an external evaluation institution. They also notified that the submission of the evaluation report containing the exercise price of the put option would be delayed. An industry official noted, "Shin's side has communicated that the submission of the evaluation report would be delayed, but they have not specified when it will be submitted," adding, "This is contrary to the contents of the arbitration ruling, and investors are likely to respond accordingly."
Previously, the International Chamber of Commerce (ICC) had ruled that Chairman Shin must "select an external evaluator and submit an evaluation report within 30 days from the date of delivery of the arbitration ruling." Failure to comply would incur a forced payment obligation of $200,000 (approximately 290 million won) per day. Since Shin's side and the Affinity consortium have been engaged in a prolonged dispute over the exercise of the put option since 2018, this ruling aims to resolve the matter quickly through indirect enforcement.
However, the potential for prolonged disputes is increasing as Chairman Shin and the Affinity consortium differ in their interpretations of the phrasing contained within the arbitration tribunal's ruling. While Chairman Shin's side maintains that they only need to "select an external evaluator within 30 days," the Affinity consortium believes that they must not only select the evaluator but also submit the evaluation report within that timeframe. If Chairman Shin's interpretation is correct, it effectively allows for the indefinite extension of the evaluation report submission.
The Affinity consortium is expected to file a request for indirect enforcement with the arbitration tribunal, demanding that Chairman Shin's side be compelled to submit the evaluation report. Given that Shin's side has selected EY Han-young as the evaluation agency, the request will likely state that the put option price must be determined and communicated within a certain period, and that additional enforcement penalties will be imposed if the deadline is exceeded. Since the second international arbitration case between Chairman Shin and the Affinity consortium is not closed, the current arbitration tribunal can still deliberate on the matter.
Chairman Shin's continuous delays in submitting the evaluation report are analyzed as efforts to secure a new financial investor (FI) to replace the Affinity consortium before the exercise price of the put option is determined. Once the pricing procedure is finalized, a delay interest of approximately 6% per year will accrue on the put option exercise price. Considering the principal amount of 1.2 trillion won (24,500 won per share) invested by the Affinity consortium, Chairman Shin would need to pay over 70 billion won in delay interest per year.
The Affinity consortium is preparing to respond by enforcing the submission of the evaluation report from Chairman Shin’s side while also preparing follow-up procedures for determining the put option exercise price. If the difference between the put option price proposed by Chairman Shin and the price proposed by Affinity, which is 409,000 won per share, exceeds 10%, both sides will select a third evaluation agency to proceed with the pricing process.
Candidates for the third evaluation agency will be recommended by Deloitte Anjin, the pricing agency selected by the Affinity consortium, and one of the three will be chosen by Chairman Shin’s side. Deloitte Anjin has already completed the process of narrowing down the three candidates. The Affinity consortium plans to submit the three evaluation agency candidates immediately after Chairman Shin presents the put option price.