After the start of corporate rehabilitation proceedings, STX's large export contract was canceled, putting the company at a critical juncture. In particular, because the contract was the "big deal" that served as grounds to defer sanctions by the financial authorities over the company's accounting fraud, it is expected to have a significant impact on future management.
Some say this is a case reflecting the times, as the role of general trading companies has diminished with the growth in size of Korea's export corporations.
STX recently said its contract to supply armored vehicles for export to Peru was terminated. Signed in 2024, the contract was worth 80 billion won, a large-scale project equivalent to 10% of the company's sales at the time. The Peruvian counterparty notified termination, judging that the company lacked the capacity to perform the contract due to the rehabilitation proceedings.
Although the contract between STX and Peru was terminated, exports of armored vehicles to Peru are expected to proceed normally. Hyundai Rotem, which manufactures the armored vehicles, will secure the shipper directly and deliver the scheduled quantities.
The problem is that the termination of the contract has made STX's business continuity uncertain. The contract was large in scale (relative to sales), but more importantly, it served as the rationale for the court's order to suspend the effect of sanctions by the financial authorities on STX.
In Jul. last year, STX was sanctioned by the financial authorities on suspicion of accounting fraud. At the time, the Securities and Futures Commission of the Financial Services Commission determined that STX and STX Marine Service, which was a subsidiary of STX until 2023, had intentionally failed to reflect the risk of overseas litigation in 2022 in their financial statements, and that this constituted accounting fraud. As a result, trading in STX's equity securities was suspended.
Denying the accounting fraud allegations, STX filed for an injunction to suspend the effect at the Administrative Court. The court at the time found an "urgent need to suspend the effect of the disposition to prevent irrecoverable harm" to STX from the sanctions by the financial authorities. The "irrecoverable harm" cited by the court was the scenario in which STX's contract to export Hyundai Rotem armored vehicles to Peru would be terminated.
However, the situation changed rapidly after STX applied on Dec. last year to the Seoul Bankruptcy Court to commence rehabilitation proceedings and the court accepted it. Although the company explained that the commencement of rehabilitation would have no impact on the contract with Peru, the Peruvian side notified termination.
With the contract—deemed so significant by the court that it suspended the effect of sanctions by the financial authorities—now broken, STX's management situation has grown complicated.
On Apr. 23, the financial authorities decided on additional sanctions against STX. The authorities viewed that, during the process of relisting after a spin-off, STX artificially boosted its stock price by making it appear as though it had sold an ailing subsidiary (STX Marine Service) at a high price, which constituted unfair trading. The authorities filed a criminal complaint with prosecutors against four members of STX management.
An industry official said, "As the core business of general trading has declined, combined with management difficulties and opaque accounting issues, STX's management situation has been on a relentless downward path."
Until now, STX earned money by pioneering overseas sales channels on behalf of manufacturers like Hyundai Rotem and collecting brokerage fees. Recently, however, as manufacturers have been exploring overseas markets directly, STX's intermediary role has been greatly reduced.