Korea Zinc on the 29th rejected claims that a paid-in capital increase for its joint venture (JV) with the U.S. government violated the law due to a sharp fall in the exchange rate, saying exchange-rate fluctuations had no impact and that it would hold those responsible for malicious distortion legally accountable.
It rebutted the argument that, due to the sharp fall in the exchange rate, the discount rate on the shares issued through the paid-in capital increase on the 26th could violate the Financial Investment Services and Capital Markets Act. The Financial Investment Services and Capital Markets Act limits the discount rate on new shares allocated in a third-party paid-in capital increase to 10%.
That day, Korea Zinc said in a statement, "For the new share issuance, the board of directors finalized the issue price in U.S. dollars and fixed the type and number of new shares to be issued," adding, "The total issue amount, calculated by multiplying the issue price by the number of shares to be issued, was also finalized in U.S. dollars."
It added, "The discount rate was calculated between the reference share price under the regulations and the issue price set by the board," and "It does not change retroactively depending on exchange-rate fluctuations that cannot be controlled or predicted after the board meeting."
On the 15th, the board of directors of Korea Zinc resolved to issue 2,209,716 new shares at $877.94 per share (1,290,133 won). Applying the exchange rate as of the 12th, the total came to $1,939,999,782, and it was received in dollars.
Therefore, Korea Zinc's position is that there is no problem even if the won value of the total issue amount changed due to exchange-rate fluctuations between the rate applied at the time of the board resolution and the time the total issue amount was paid in.
In fact, on the 26th, when Korea Zinc received the paid-in capital, Hana Bank's first-announced won-dollar base rate was 1,460 won 60 jeon, about 0.6% lower than the rate applied at the time of the board meeting (1,469 won 50 jeon).
Young Poong and MBK Partners (on the Young Poong side), the largest shareholders of Korea Zinc, argue that because the won-dollar exchange rate fell, the disclosed board resolution and the actual capital increase amount differ, creating a high risk of illegality that must be corrected.
They say the total issue amount paid in was about 17.3 billion won less than at the time of the board resolution due to the drop in the won-dollar exchange rate, and that the per-share amount was 1,282,319 won, reflecting a 10.3% discount—higher than the statutory limit.
The Young Poong side said, "This new share issuance, which violates the issue price regulations of the Financial Investment Services and Capital Markets Act, is serious enough to constitute grounds for nullity," and added, "This issue must be resolved lawfully as soon as possible."
By contrast, Korea Zinc said, "It is sophistry to suggest that the matters of issuance set by the board can fluctuate arbitrarily due to ex post and uncontrollable factors such as the exchange rate," adding, "It appears to be an attempt to repudiate the contracts among the parties to this project."
It continued, "To portray a new share issuance that the court approved as lawful as if it were controversial after the fact is a highly malicious act of market disruption that causes confusion," adding, "It will be difficult to avoid severe legal liability."