As the cold snap in Korea's manufacturing sector continues, factories of small and midsize manufacturers are being put up for public auction one after another. Even corporations that once won the "$10 million Export Tower" with major transaction partners such as Samsung Electronics have not been able to avoid closure and public auctions of factory sites.
From home appliance partners to auto parts manufacturers, they have not been able to withstand the downturn, and major assets such as factories are entering the public auction market. The Korea Asset Management Corporation (KAMCO) plans to hold an "acquired manufacturing plant sale exhibition" to sell factory sites of distressed corporations through the end of this month.
According to KAMCO and the trust industry on the 28th, the factory facilities at 1037, Woljeon-dong, Gwangsan-gu, Gwangju, are undergoing public auction procedures. This is the Gwangju plant of Sungil Innotek, a home appliance partner of Samsung Electronics. The land of 14,286.3㎡ and the building of 19,327.96㎡ at this plant are subject to auction. The appraised value is 16.64615 billion won.
Founded in 2005 as a corporations specializing in glass screen printing, Sungil Innotek expanded into manufacturing parts used in home appliances and furniture. It supplied refrigerator doors to Samsung Electronics, Dongbu Daewoo Electronics, and Dayou Winia, and later developed a "special 3D intaglio/relief technology" that can engrave patterns on materials such as glass, acrylic, and steel plates. In 2015, it received the "$10 million Export Tower" from the Korea International Trade Association and the Ministry of Trade, Industry and Energy.
However, it faced difficulties as Samsung Electronics' home appliance production base was relocated to its Mexico plant. Some production lines have been halted since Oct. last year, and it is said to have completely closed in June this year. A search of the company's business registration number on the National Tax Service Hometax classifies it as closed. A representative of the trust company in charge of this factory facilities auction said, "The bank-held (the company's) claims have been securitized, and KAMCO is the de facto beneficiary."
As with Sungil Innotek, small and midsize manufacturers facing a difficult corporate environment are selling factory sites, leading to a steady increase in related items on the public auction market. KAMCO, which is tasked with supporting distressed corporations, is holding an "acquired manufacturing plant sale exhibition" through the end of this month. KAMCO is putting up for auction the factory sites it secured in exchange for providing liquidity to corporations.
A KAMCO representative said, "We are selling items acquired through the sale and leaseback program (S&LB) or the corporate asset securitization acquisition program." S&LB is a program in which assets such as factories and office buildings of corporations experiencing a temporary liquidity crisis are purchased and then leased back to supply liquidity to the corporations. The corporate asset securitization program involves KAMCO establishing a special purpose company (SPC) to support corporations in collateral trust of assets they hold so they can raise funds in the capital markets.
This auction exhibition also includes a factory site of an auto parts company in Pyeongtaek, Gyeonggi Province. The minimum bid for the factory site located at 2047 Seodong-daero, Oseong-myeon, Pyeongtaek, Gyeonggi Province, is 25.5142142 billion won. The factory site of a metal products wholesaler at 45 Wanju Sandan 8-ro, Bongdong-eup, Wanju-gun, North Jeolla Province, will also be put up for auction at 17.04512 billion won.
Given the bleak outlook for manufacturing, there is an expectation that more factory sites of such small and midsize manufacturers will come onto the public auction market. A survey by The Federation of Korean Industries of the top 600 corporations by sales on the Business Survey Index (BSI) showed the November BSI outlook at 94.8, below the baseline of 100. The BSI outlook has remained below the 100 baseline for 3 years and 8 months since Apr. 2022 (99.1). Manufacturing also stood at 96.8, indicating weakness for the fourth consecutive month.
A financial industry official said, "Support for corporations of concern for distress by KAMCO has increased significantly recently," adding, "The securitized assets of corporations that failed to overcome liquidity crises could come onto the public auction market."