This article was published on Mar. 5, 2025, at 2:11 p.m. on the ChosunBiz RM Report site.
A court has ruled that KB Securities, a creditor, can sell the equity of Daegu MBC held by Makgeum Co., Ltd., the second-largest shareholder. If this is finalized, Makgeum will lose its status as the second-largest shareholder of Daegu MBC.
The Seoul Central District Court Civil Division 51 (Chief Judge Director General Kim Seung-jeong) reportedly rejected an injunction that Makgeum filed against KB Securities in January, seeking to prevent the sale of Daegu MBC shares pledged as collateral.
Makgeum became the second-largest shareholder of Daegu MBC by securing 32.5% equity in December 2019. At that time, Makgeum borrowed 22 billion won from KB Securities to purchase Daegu MBC shares. The contract stipulated that if Makgeum failed to repay the principal and interest, KB Securities could sell 54,146 shares of Daegu MBC held by Makgeum. Notably, it included a clause stating that 'KB Securities can dispose of the collateral (Daegu MBC shares) at its discretion by methods, timing, and prices generally deemed appropriate and can use the proceeds to repay the debt or in lieu of partial repayment to acquire the aforementioned shares.'
However, Makgeum was hampered by the Korea Communications Commission. To acquire more than 30% of the shares of a broadcast company, approval from the commission is required, and Makgeum failed to pass this stage. Subsequently, Makgeum attempted to sell its equity in Daegu MBC, but the sale did not materialize. In the meantime, the time to repay the borrowed funds from KB Securities had passed.
In response, KB Securities decided to sell the equity of Daegu MBC pledged by Makgeum as collateral. The method of sale will be a 'private contract' where a specific company is designated for the transaction. As a result, Makgeum filed for an injunction last June, stating that for the sake of transparency in the disposal process, the sale should undergo procedures such as bidding or auction instead of a private contract. There was a claim that bidding, etc., would likely yield a higher price than the private contract.
The court in charge of the first instance of the injunction case ruled that 'based on the contract between the two parties, if Makgeum does not repay the money on time, KB Securities can dispose of the collateral, which is the equity of Daegu MBC, at its discretion by methods, timing, and prices generally deemed appropriate.' The court further stated, 'It is reasonable to view that there is complete discretion granted to KB Securities regarding the method of disposal,' adding, 'There is no basis for viewing the disposal of Daegu MBC equity through a private contract as a breach of contract.'
Makgeum appealed this decision to the Seoul High Court last month. As a follow-up, a further appeal is also possible, meaning the final conclusion may come from the Supreme Court.