The Return of the Ruined Chaebol's Third-Generation Heir - Chapter 126

—————
This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
—————

The Regression of a Fallen Chaebol Heir — Chapter 126
“Long time no see.”
December 2010. As I stepped into Kim Jong-su’s traditional Korean house office in Bukchon, he greeted me warmly.
“You’ve been doing well, I hope?”
“Well enough. I’ve been hearing updates about you through Director Jung. So you’ve gone into Shinjin?”
I smiled slightly and nodded, then he gestured for me to have a seat.
“How is it? Worth the effort?”
“I’m not sure how to describe it. It’s rewarding, but difficult.”
“That would be it. Juggling company work and your own affairs—it’s something ordinary men like me couldn’t manage even if we wanted to.”
Kim Jong-su chuckled, but his expression soon turned serious.
“This is the first time you’ve asked to meet first, isn’t it?”
“I have something urgent to discuss.”
Kim Jong-su nodded. We’d already exchanged several views through Jung Tae-sung.
“I haven’t been sleeping well lately.”
……
“Savings banks are coming to me asking for loans.”
Savings banks were approaching other savings banks to borrow money—an ironic situation, but one that spoke volumes about the crisis they faced.
“It’s not just one or two places. Some are even taking out private loans to cover PF interest payments.”
The fact that they were tapping private loans just to cover deposits meant their normal operating margins could no longer sustain interest payments.
They’d reached the stage of using debt to plug debt—a point of no return for any savings bank.
“I’ve spent forty years in finance, and when this smell starts wafting up, it means something big will happen within a year.”
Kim Jong-su tapped his fingers anxiously against the sofa’s armrest.
“How many have their BIS ratios hitting the floor?”
“Five that I know of. I’d guess there are over ten in total.”
More than ten savings banks in a state of de facto insolvency.
In my past life, around this period, savings banks had swollen their assets through aggressive real estate Project Finance loans. When the real estate market tanked, they’d triggered a cascade of defaults, massive bank runs, and catastrophic losses for ordinary depositors.
Essentially, Korea’s version of the Lehman Shock.
“Seongshin is fine. They’re respecting the 30% PF cap, and CEO Yun is doing well.”
Kim Jong-su paused briefly, then looked at me.
“But the real problem isn’t that.”
“Fear is contagious.”
……That’s right. When your neighbor collapses, even the sound one looks rotten.
Fear had tremendous contagion.
Like a drop of dark ink clouding an entire tank of clear water in an instant, market confidence could be easily turbid at the smallest ripple.
“Chairman, I’ll be frank with you.”
I met his eyes steadily.
“I think time is running out.”
Kim Jong-su wasn’t surprised—he’d likely sensed it already.
“What’s your reasoning?”
“Three points.”
……
“First, the base rate will keep rising. There’s no reason for the Bank of Korea to stop at 2.5%. By early next year, it’ll be 2.75%, and then 3%.”
Kim Jong-su nodded.
“Second, just as you said, there are over ten places covering PF interest with private loans. If the rate goes up even once more, they’ll all burst simultaneously.”
When the base rate rises, both PF lending rates and deposit rates climb. That means more money owed and greater risk of shortfalls on incoming funds.
There are already construction companies that can’t service their PF loans at current rates.
“Third, the FSC will take action. If they don’t, sound institutions will fail too, as I mentioned. Once they move to clean up insolvent savings banks, business suspensions will come raining down all at once.”
The room fell silent. Kim Jong-su’s fingers stopped on the armrest.
“If you’re right, we’ll need to prepare.”
Kim Jong-su thought for a moment, then opened his mouth.
“What do we need to get ready?”
“Seongshin needs to secure emergency liquidity. When a bank run hits, cash is the only answer.”
“How much?”
“At least 20% of total deposits. In absolute terms, several hundred billion won.”
Kim Jong-su nodded. The bleed was expected, but it wasn’t an amount beyond his reach.
“I can arrange the cash. Timing is the issue.”
“The sooner the better. If you wait until it breaks, you’ll be too late.”
“Understood.”
He paused, collecting himself.
“There’s one more thing I need to tell you.”
Kim Jong-su watched me quietly.
“Among the failing savings banks, there will be diamonds. Places with strong branch networks or solid deposit bases. DK Capital is preparing to enter acquisition negotiations with such institutions.”
Kim Jong-su’s eyes changed. He’d grasped that this wasn’t just defense.
“You’re planning to operate directly?”
“No. We’ll normalize operations after the acquisition, and then sell once the work is complete.”
“You want me to buy it.”
“Precisely.”
“Good. We’ll grow solidly if we just make it through this period. I’ll acquire it.”
Kim Jong-su nodded, and I nodded back at him.

Two months later, I was reviewing the day’s news on a Bloomberg terminal after hours in the office.
“It’s starting.”
The year-end atmosphere had turned abysmal. Savings bank crises were worsening, and the real economy was deteriorating with them.
[Hanbit Savings Bank: FSC Imposes Business Suspension]
The FSC moved quickly to intervene, issuing business suspension orders against the banks.
The first target was Hanbit Savings Bank, whose BIS ratio had fallen below standard—a place where PF holdings exceeded 60%.
The collapse of the construction market and rate hikes hit simultaneously, leaving them unable to service the interest.
One collapsed, and fear spread. Four more institutions were hit with suspensions, and depositors nationwide began to panic.
“CEO, the situation doesn’t look good.”
Jung Tae-sung, who had stepped out briefly for a call, returned to the office.
“Lines are forming outside Seongshin’s main branch.”
I frowned and checked the time. It was past 8 p.m.—people were lining up to withdraw deposits early tomorrow morning.
It meant customer anxiety had reached its peak.
“Contact Chairman Kim Jong-su. He’s probably already aware.”
“Understood.”
Two months ago, following my advice, he should be stockpiling cash to weather this period.
“Also tell CEO Yun to go to the main branch in person and explain the situation to depositors. Prepare materials showing Seongshin’s PF weighting and BIS ratio, and distribute them. And—”
I continued, speaking toward Jung Tae-sung, who was taking notes.
“Don’t try to convince customers not to withdraw. Tell them that paying out all withdrawals is the fastest way to extinguish the panic.”
With sufficient cash on hand, we needed to prove we were safe.
“Yes, I’ll relay this immediately.”
Jung Tae-sung left to communicate my instructions, and I immediately picked up my phone to call Danny.
—I was just about to call you anyway.
Danny picked up right away.
“You’ve seen the news?”
—Of course. Why are you so calm? I got cold sweats just watching.
“The list is ready, right?”
—Naturally. I’ve narrowed down several targets from institutions that received suspension orders and those at risk of insolvency going forward. But here’s the funny part—no one’s stepping up to acquire.”
Suspended savings banks lose asset value with each passing day.
While the Deposit Insurance Corporation invests funds for depositor protection, without a buyer, there’s no choice but to liquidate the assets.
Chaebols fear the image risk. Private equity funds lack savings bank operational experience.
“That’s exactly why DK stepping in will be welcomed by the authorities.”
—That’s what I thought too. In fact, we just expanded our government affairs division recently, and they told me the authorities are actively searching for someone to acquire these insolvent banks.
Since DK would be making distressed asset acquisition its main business, a government relations team was necessary. It looked like Danny had proactively assembled one.
The authorities inevitably had to intervene and manage cleanups to prevent failed enterprises from spreading contagion elsewhere.
Danny was proving to be a partner whose instincts and moves aligned perfectly with mine.
“Begin negotiations immediately. But don’t rush.”
—Time’s on our side. I’ll approach the authorities first to signal our intent. If a private equity fund tries to acquire a savings bank directly, the authorities might push back.
“Good call. Contact the authorities first, then move forward.”
—Got it. Oh, and I should tell you—Min-jae’s doing great. He actually helped me narrow down the first list.”
Lee Min-jae had apparently joined DK right after graduating. Good news.
“That’s fortunate.”
—Since joining, he’s been like a fish in water. Anyway, I’ll move on it and report once everything’s done.
“Go ahead.”
I hung up and leaned back in my chair.
“The savings bank crisis will need to resolve quickly. But there are still bigger things waiting ahead.”

A month later, Jung Tae-sung came to the office after hours to report.
“Seongshin Savings Bank is stabilizing.”
“Deposits have actually increased since the bank run. It seems customers now see it as a surviving institution in the industry. Meanwhile, we’ve reduced the PF weighting to 28%.”
Conservative management was yielding results.
Meanwhile, the industry continued to crumble. Business suspensions exceeded eight institutions, and the FSC was signaling more cleanups ahead.
“What about DK?”
“CEO Danny is in acquisition negotiations with two suspended savings banks. The FSC is said to be favorable.”
I nodded.
Things were unfolding as planned.
“And Ribbon?”
“According to CEO Han’s report, returns have hit double digits.”
Following QE2, foreign capital had streamed in steadily, and the KOSPI had broken 2,000 in four months. Han Jae-yi’s portfolio was now in double-digit returns.
“She’s also completed liquidation of all portfolios as you instructed.”
“Any objections?”
Asking them to liquidate stocks that were still rising would naturally stir complaints within Ribbon.
“CEO Han handled it well. She said there must be a reason since it was your instruction.”
“Good to hear. They’ll soon realize this timing was optimal.”
Jung Tae-sung passed over documents.
“Next is Ochang. Director Park Jin-hyeok is proceeding with semiconductor line expansion, and CEO Seo Min-seung is preparing a logistics robot demonstration.”
“And CEO Hong?”
“He’s still in Japan. Electrolyte sample testing with Panasonic is underway, and he’s continuing meetings with other battery manufacturers. The response has been positive.”
Hong Sang-jin, CEO of Shinhwa Welltech, was expanding his foothold in Japan.
“Good. Keep a close eye on Shinhwa Welltech. Things may get busy soon.”
“Understood.”
Zzzt—
Just as Jung Tae-sung was about to leave, my phone vibrated, and the screen showed it was Hong Sang-jin.
“CEO Hong?”
—CEO, I have an urgent report. I’m in Osaka right now…
Hong Sang-jin’s voice was trembling.
—An earthquake has struck Japan. It’s not minor.
My hand froze. I turned to look at the calendar.
‘March 11th. Today…’
In my past life, a major earthquake had hit the Tohoku-Fukushima region around this time. I remembered the period, but not the exact date.
“Are you all right, CEO Hong?”
—I’m fine since I’m in Osaka. But looking at the news, the Tohoku region is completely…
Hong Sang-jin trailed off.
—Shinjin has trading partners in Tohoku.
Shinjin’s raw material suppliers and major customer factories were located in Tohoku.
If Shinjin’s material supply was cut off, the Ulsan joint venture line would halt. If the nuclear power plants in the Tohoku region suffered damage and Japan faced a power shortage, Shinjin’s headquarters operations would inevitably suffer too.
When Japanese customer factories stopped, their delivery destinations would be paralyzed for an extended period…
This was precisely why I’d hastily ordered Shinhwa Welltech to expand its semiconductor chemical production lines.
‘Shinjin’s crisis could become Shinhwa Welltech’s opportunity. But the partnership…’
My mind began racing.
“CEO Hong, get yourself to a safe location for now. I’ll reach out to President Nakamura myself.”
—Understood.
I hung up and checked the Bloomberg terminal. Asian futures were plummeting.
“Director Jung. Something’s happened in Japan.”
“What do you mean?”
“A major earthquake has struck the Tohoku region, and a tsunami is coming. That region has nuclear power plants.”
Jung Tae-sung frowned in alarm at my words.
“I need to make a trip to Osaka for one night. Book a flight for me.”
“Will you be all right?”
“Osaka should be fine. Just in case flights are unavailable, look into chartering a private jet as well.”
“Understood.”
Jung Tae-sung bowed and left the room, and I took a long, deep breath.

—————
This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
—————