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Businesses brace for liquidity crisis by selling assets

LG Twin Tower in Seoul (Park Hyun-koo/The Korea Herald)
LG Twin Tower in Seoul (Park Hyun-koo/The Korea Herald)

Facing a looming liquidity crunch due to the coronavirus crisis, South Korean companies have sold off their assets, including real estate and equities, to keep enough cash in their vaults, according to the Korea Exchange on Thursday.

From January to April 7, 29 companies sold a combined 1.5 trillion won ($1.23 billion) worth of tangible assets, compared to 481.6 billion won worth assets sold by 18 companies during the same period last year, the bourse operator said.

Most of the asset sales were aimed at improving liquidity while a few sold their offices to move to newly-built ones.

“The government’s measures in response to the ongoing coronavirus crisis, including a fund to stabilize the bond market and a program to finance companies via repurchase agreements, have helped cash-strapped companies hit by the virus,” said an official from the local securities market.

“Companies, however, will try to secure more cash as it is unclear when the ongoing crisis will end.”

Retail giant E-mart announced late last month that it sold a 39,089-square-meter plot for 815.8 billion won. In a regulatory filing, the company said it proceeded with the sale to secure money for new investments and improve its financial solvency. It bought the property in 2013 for 234 billion won from Seoul Housing & Communities Corporation, a real estate services firm run by the municipal government.

It had initially planned to build its signature Starfield shopping complexes on the land, but the plan went awry due partly to the intensifying competition with emerging e-commerce companies. E-mart has faced pressure to reduce its number of brick-and-mortar stores in recent months. Last year it sold 13 stores across the nation for a total of 952.5 billion won.

Cosmetics giant Amorepacific and building materials producer LG Hausys, were among other companies that have sold their offices recently.

The cosmetics firm sold an office building in Gangnam-gu, which used to house employees of its affiliates, for 160 billion won in March. LG Hausys sold an accommodation building for its employees in Ulsan for 63 billion won.

The combined value of equities sold by companies this year, until April 7, also increased to 2.07 trillion won, up from 1.4 trillion won during the same period last year.

Tech giant LG Electronics offloaded 668.8 billion won worth of shares in its Chinese branch LG Holdings while commodity trader LG International sold 341.2 billion worth stocks in the tech firm’s Chinese branch.

Snack company Haitai Confectionery & Foods handed over its ice cream business unit to its rival Binggrae for 140 billion won, while entertainment firm CJ ENM sold stakes worth 166.1 billion won in Studio Dragon via a block trading deal.

Companies listed on the nation’s main bourse Kospi and secondary Kosdaq market had a combined 476.4 trillion won worth of cashable assets last year, up 6.2 percent on-year, according to financial data tracker FnGuide.

By Kim Young-won (