Exclusive: Court orders another freeze on W10b in Hanmi Science shares held by Shin Dong-kook

A court has again ordered a provisional seizure of Hanmi Science shares held by Shin Dong-kook, chairman of Hanyang Precision, this time worth 10 billion won ($7.47 million), it has been confirmed.

Because the frozen shares are among those Shin pledged as collateral for hundreds of billions of won in stock-backed loans from financial institutions, analysts say the ruling will further strain his liquidity management and financial position amid an ongoing ownership battle.

The Seoul Central District Court recently granted a 10 billion won provisional seizure of Hanmi Science shares filed against Shin by Hanmi Pharm Group Chairwoman Song Young-sook, Hanmi Science Vice Chairwoman Im Joo-hyun and Killington LLC.

The shares targeted in this freeze are among those Shin pledged as collateral to Hana Securities and Korea Securities Finance Corp. to secure extensions on loans worth hundreds of billions of won. Earlier, Song and Im had obtained a provisional seizure of Shin's Hanmi Science shares worth 12 billion won and his apartment at Hannam The Hill in Yongsan-gu, Seoul, worth 10 billion won — both as preservation measures in a 60 billion won penalty lawsuit related to a senior care business. Shin, in turn, obtained his own provisional seizure order in July against 10 billion won worth of shares held by Im.

This latest order is a separate preservation measure from the 60 billion won penalty lawsuit in which the court ruled against the plaintiffs on Oct. 1. The court's specific reasoning for granting the freeze was not disclosed, but industry sources believe it stems from claims that Shin violated additional provisions of a four-party agreement while increasing his stake in Hanmi Science. Shin was recently reported to prosecutors by former Hanmi Pharm Group executives on charges of embezzlement and breach of fiduciary duty under the Act on the Aggravated Punishment of Specific Economic Crimes; Shin has filed a counter-complaint against them for false accusation.

The market is watching whether the freeze will ripple into the financial sector. Particular attention has turned to the moves of Hana Securities and other lenders that recently extended Shin's loans worth hundreds of billions of won and took on the collateral.

Multiple investment banking sources said NH Investment & Securities and several other major brokerages declined to extend Shin's stock-backed loans, which had been set to mature at the end of last month. Hana Securities and Korea Securities Finance Corp. stepped in to take over the loans, drawing widespread commentary in financial circles.

The terms set by Hana Securities, now the largest lender, and by Korea Securities Finance Corp. for the Hanmi Pharm collateral have become notably stricter. Hana Securities raised the interest rate to 4.45 percent and the collateral maintenance ratio to 200 percent — applying those terms not only to the portion refinanced from NH Investment & Securities, which had carried a 4.30 percent rate and a 140 percent ratio, but also to its own existing loan from August, which had been set at 4.10 percent and 160 percent.

Korea Securities Finance Corp. also tightened its terms when renewing the Hanmi Pharm stock-backed loan: it reduced the loan amount by 12 billion won, from 150 billion won to 138 billion won, while simultaneously increasing the number of pledged shares by 80,000 — from 510,436 to 590,436 — and raising the interest rate from 4.15 percent to 4.25 percent.

According to DART, Shin's total outstanding stock-backed borrowings secured by Hanmi Pharm and Hanmi Science shares stand at 432.2 billion won. By collateral, approximately 236.7 billion won is backed by Hanmi Pharm shares and approximately 195.6 billion won by Hanmi Science shares. By lender, Hana Securities accounts for approximately 234.2 billion won and Korea Securities Finance Corp. for 198 billion won.

Shin had originally borrowed 113.2 billion won through NH Investment & Securities, pledging approximately 7.79 million Hanmi Science shares as collateral. Hana Securities and Korea Securities Finance Corp. came in as new lenders as Shin bought additional Hanmi Science shares. The combined loan balance from the two institutions — which entered as Shin acquired stakes in March (213.7 billion won) and August (172.7 billion won) — stood at approximately 286.2 billion won just before the refinancing on Sept. 21.

On Sept. 21, NH Investment & Securities' 113.2 billion won loan was fully terminated and replaced by loans from Hana Securities (98 billion won) and Korea Securities Finance Corp. (60 billion won). Through this process, Shin's total stock-backed loan balance grew by approximately 32.4 billion won compared with early September (399.8 billion won). The entire 432.2 billion won in existing stock-backed loans matures in mid-to-late March next year.

On top of that, Shin signed a contract Thursday to purchase an additional 1,382,832 Hanmi Science shares from Korea Value-Up Private Equity and two other parties for 69.3 billion won, and disclosed plans to fund the full purchase price through stock-backed loans from financial institutions. If that borrowing is executed, Shin's total stock-backed loan balance will exceed 500 billion won.

Industry observers have consistently raised concerns about Shin's heavy debt load. Hanmi Science and Hanmi Pharm — the two listed flagships of Hanmi Pharm Group — have also been exposed to market volatility, with their share prices posting a sharp short-term decline shortly after news broke that the Korean obesity drug "Effe" had received marketing approval.

"Other financial institutions avoided this deal out of risk concerns, and it was taken on with tightened conditions — so the more Shin's legal and financial risks surface, the more tension will inevitably build within the lender group," one investment banking industry official said.