The Return of the Ruined Chaebol's Third-Generation Heir - Chapter 86

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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Regression of a Fallen Chaebol Heir, Episode 86
“I’ve compiled the materials on Seonjin Trading Company’s shipping division that you instructed me to prepare last week.”
Early July 2009.
Ribbon Capital’s office. A stack of documents lay on the table—thicker than usual. Jung Tae-sung distributed copies as he began to speak.
“You’ve done well. There probably wasn’t much information available from external sources.”
“Not at all.”
The materials I’d assigned to Jung Tae-sung a week ago—judging by their thickness and his nature, he wouldn’t have cut corners.
Han Jae-yi accepted her copy, and I turned to the first page.
“Seonjin Trading currently owns fifteen container ships. The original five, plus ten from the acquisition of Western Shipping in 2003. All fifteen are operating at a loss.”
“All of them?”
“There isn’t a single profitable route.”
I’d expected as much, but seeing it in numbers carried a different weight.
“Current freight rates: Based on the Asia-Europe route, container rates are approximately five hundred dollars per TEU. Operating costs run around eight hundred dollars, so we’re looking at roughly a three-hundred-dollar loss per TEU. The more containers we move, the more we lose.”
The shipping industry calculates a container approximately six-point-one meters long as one TEU. In other words, five hundred dollars per TEU meant Seonjin received five hundred dollars in freight charges for every container shipped.
Han Jae-yi flipped through the report and asked, “What if we bundle them for delivery?”
“If we lay up the vessels, operational losses stop, but maintenance costs roughly ten thousand dollars per ship per day. Fifteen ships means one-fifty thousand daily, or approximately 1.8 billion won per month. Whether we run them or dock them, we’re bleeding red.”
“How significant is the monthly loss?”
“Operating basis—roughly 5 billion won per month. Six hundred billion annually. Unless freight rates recover, we lose money every single month.”
Five billion won monthly. It was like watching the bottom drain by five billion every thirty days. No wonder Mother’s expression had been grim at dinner.
“Next: vessel asset values. Market prices have dropped sixty to seventy percent below book value.”
The problem ran deeper still. Of course, we’d acquired used ships with limited remaining years, but the decline in vessel values was shockingly swift.
“This translates to hundreds of billions in balance sheet impact. Even if we don’t recognize it and simply endure, banks can demand collateral revaluation. A considerable number of these vessels likely have inverted LTV ratios.”
As the ships depreciated, we had to record those losses on the financial statements. The moment we recorded such losses in the ledgers, the company would obviously look insolvent to outsiders.
We’d borrowed money using the ships as collateral. Banks would mobilize to recover principal. The situation was deeply troubling from every angle.
Han Jae-yi interjected. “If the ships are mortgaged for loans and collateral value drops, you could face demands for additional collateral, correct?”
“Exactly.”
Selling meant losses. Holding meant five billion won hemorrhaging monthly. Even the collateral value was eroding, and banks would certainly move in. There was no exit in any direction.
“Industry overview: Globally, idle container vessels represent twelve percent of the fleet—roughly 1.4 million TEU. Europe-Far East scheduled routes have shrunk from sixty-four to forty-five.”
“What about domestically?”
“Korea’s top four shipping lines combined: 2.2 trillion won in operating losses. Hanmin Shipping lost 940 billion, Daeshin Shipping 480 billion. Even Maersk, the world’s largest carrier, posted its first-ever loss since founding—over twenty billion dollars.”
Han Jae-yi murmured, “If Maersk is in the red, the world’s number one is in the red….”
“The government has mobilized as well. KAMCO established a ship fund, investing 460 billion won, and purchased sixteen vessels from Hanmin Shipping. The government literally had to buy ships to keep them afloat.”
The government was purchasing ships.
That meant the industry couldn’t sustain itself. Seonjin Trading was no exception.
“What about the offer traders?”
“The trading side isn’t hemorrhaging like shipping, but volumes have dropped significantly. Chinese buyers were already shifting to direct deals, and the financial crisis has accelerated that trend by shrinking trade itself. There’s nothing left to broker.”
“So the entire company has deteriorated.”
“That’s correct. Trading side: declining revenue. Shipping: losses. Both divisions are being squeezed simultaneously. The urgent crisis, however, is shipping. Trading loses incoming money but isn’t losing it from the balance sheet. Ships, even sitting still….”
“Keep racking up monthly deficits.”
I nodded, and Jung Tae-sung opened the final page.
“Projections. On sale: substantial losses versus book value, but hemorrhaging stops. On hold: 5 billion won monthly losses accumulate. Recovery timeline for freight rates remains opaque.”
Han Jae-yi asked, “The BDI climbed from 663 to 3,500. Bulk shipping is being kept alive by Chinese demand. Is there really no chance container rates follow?”
“Bulk is alive because Chinese infrastructure investment revived demand for iron ore and coal. Containers depend on finished goods trade returning, but consumption in Europe and the US isn’t recovering. A rising BDI doesn’t automatically pull container rates along.”
“The market’s recovering everywhere else, but our ships are just dying.”
Jung Tae-sung set down the documents.
“Bottom line: restructuring is unavoidable.”
Silence settled over the table. I’d expected this, but seeing it in numbers made it crystalline.
“You’re right—the trading company’s in rough shape. That’s why the chairman is concerned, isn’t it?”
I nodded slowly at Han Jae-yi’s question.
In truth, there was a reason I was taking this problem seriously. A year had passed since Lehman Brothers collapsed, and if my memory of my past life held true….
‘The Dubai Shock.’
Dubai, one of the Emirates, announces a moratorium—saying it cannot immediately repay approximately 68 trillion won in debt.
Just as financial markets had stabilized, shock ripples through again, hitting export-dependent nations like Korea in multiple ways.
In Seonjin Trading’s case, because we borrowed from banks to buy ships, those banks step in to pressure the company to recover principal.
In my previous life, Seonjin Trading stumbles and eventually passes into the hands of my cousins as a direct result.
“Get this report to Kim Seok-jun.”
I looked at Jung Tae-sung as I spoke.
“Kim Seok-jun, the executive director?”
“Yes. SJ Holdings is a shareholder of Seonjin Trading, and Kim is an outside director. He’ll have more room to maneuver internally than I do.”
“Understood.”
“If you mention I passed along the report, he’ll handle the rest himself.”
Jung Tae-sung bowed his head.
“I’ll credit the report to the executive director’s name.”
“Good.”
I replied as such, then turned to Han Jae-yi.
“Focus on macro situations for now. Once Seonjin reaches internal consensus, that’s when we’ll have room to step in.”
“Understood. And the market?”
“For the time being, we hold off on new acquisitions. We’ll just manage existing assets.”
“Got it.”
Han Jae-yi nodded and returned to her desk.
‘I hope the internal side moves well first.’
Mother’s management ability was being tested once again, and all I could do now was shape how we support from outside, whatever conclusion emerges internally.

* * *
“The Seonjin Trading board results are in.”
Days later, an emergency board meeting at Seonjin Trading Company.

Choi Dong-su distributed materials and continued. “Based on the analytical report submitted by outside director Kim Seok-jun, the planning team has reviewed and supplemented the analysis.”
The outside director’s problem-raising, planning review, and board presentation followed official procedure—a formally-tabled agenda item.
Choi Dong-su’s report began. “Seonjin Trading’s fifteen container vessels—all are operating at losses. Freight rates are below cost, and continued holding generates roughly 5 billion won in monthly accumulated losses. Six hundred billion annually.”
He paused and surveyed the directors. “Vessel asset values have fallen more than sixty percent below book value. Even if sold, substantial losses occur, but holding means bleeding continues.”
“Then what’s the alternative?” one director asked.
“Given the current situation, there’s no option but to liquidate the fleet.”
The conference room fell silent.
Every face bore the mark of careful consideration, and then Mother spoke. “Is there any possibility container rates recover within this year?”
“Container rates require European and American consumption to return. Current consensus is that recovery to cost levels this year is unlikely.”
“What about the KAMCO ship fund?”
Under the Korea Asset Management Corporation’s leadership, several shipping lines were undergoing major restructuring.
KAMCO purchased companies’ ships, providing them funds, then leased the vessels back so they could continue operations.
With no one in the private market buying used ships, the government had stepped in.
“We did request assistance, but the answer is simply to wait. KAMCO’s 460 billion won fund is primarily focused on larger carriers like Hanmin Shipping.”
Seonjin was comparatively smaller, and the massive carriers teetered on the brink of insolvency, so government aid was directed their way first.
Seonjin struggled too, but from the government’s perspective, we were back of the line.
When the report ended, one director raised his hand. “The bulk freight index climbed from 663 to 3,500, which clearly shows strong bulk recovery. Can we completely rule out containers following in the second half? Selling now might mean bottom-dollar disposal.”
Several directors nodded in agreement.
Everyone knew the numbers were bad. But the refrain ‘if we just wait a little longer’ always held appeal.
“That’s bulk,” Mother countered.
“Container rates aren’t recovering. Containers move when European and American consumption revives—not because bulk indices rise. Rising bulk rates don’t pull containers along.”
The board fell silent again.
“We lose five billion won monthly while waiting. Wait six months, that’s 300 billion gone. If that wait holds equivalent value, I’d consider it—but it doesn’t appear so now.”
Silence descended on the board once more, and Kim Seok-jun, seeing his moment, spoke. “As the report’s author, I offer this perspective.”
The directors’ attention turned to him.
“Maersk posted its first loss in company history. Twenty billion dollars. If the world’s number one is in the red, what exactly changes because we wait?”
“However, if selling ships means losses and holding them means losses, isn’t simply enduring also a valid strategy?”
Internally, the other directors saw improvement on the horizon.
“KAMCO hasn’t rejected our proposal either—they simply said to wait. Won’t our turn come?”
“It will be difficult. KAMCO’s fund capital has already flowed entirely to Hanmin and Daeshin.”
Kim Seok-jun looked at the directors and spoke. “You must become fluent in how government operates. When officials tell us to wait, they mean Seonjin is back of the queue—and that money won’t be coming back.”
“…….”
All the directors knew Kim Seok-jun well. He’d been the treasurer beside the previous chairman, a man practiced in navigating official channels.
No director at this table would lightly dismiss his words.
“Very well.”
When Kim Seok-jun finished, Mother nodded. “The answer’s clear. We’ll proceed with internal restructuring without waiting for the government.”
Mother showed no hesitation. She was very different from when she first attended a board meeting.
Decisive. Quick to commit.
“Park, what do you think?”
Mother’s gaze turned to Park Chul-min, Seonjin Trading’s representative director.
Five years ago, when Mother orchestrated the ship acquisition, this man had been there at that table making the decision together.
Acquiring ships had been a success then, and the company survived. Now circumstances reversed.
She had to undo that decision with her own hands.
“We’ll find buyers.”
Mother nodded. “We’ll begin systematic liquidation starting with the worst loss-making vessels. The planning team and the trading company will jointly identify sale candidates and submit concrete sale proposals at the next board meeting.”
“We’ll prepare candidate selection and due diligence materials on the company side.”
Park Chul-min replied.
“I hope it’s not too late.”
Mother spoke thus and rose from her seat.

* * *
“The Seonjin Trading board results are out,” Tae-sung informed me.
Back at Ribbon Capital’s office, I lifted my head from work at his voice.
“Kim Seok-jun reached out, I assume?”
“He did.”
“And the outcome?”
“Staged liquidation of loss-making vessels has been approved. The group’s planning team and the trading company will jointly prepare the sale plan and execute it.”
I nodded. In the current circumstances, we’d chosen the best available path.
“Did Mother decide directly?”
“Yes. According to Kim Seok-jun, she saw the report and decided immediately. Internally restructure without waiting for the government—those were her words.”
Relief washed over me. These five years had hardened not just me and Han Jae-yi, but Mother as well.
“There was opposition?”
“A few directors pushed back. Their argument: bulk freight’s rebounding, so containers might follow—wouldn’t selling now be bottom-fishing?”
A week ago, Han Jae-yi posed a similar question—if the BDI’s rising, won’t containers follow?

“Kim Seok-jun addressed their concerns, according to the account.”
With Kim Seok-jun or Choi Dong-su supporting Mother inside Seonjin Group, we were fortunate.
“The sale targets are the heaviest loss-making vessels.”
“That’s right.”
“Will there be buyers?”
Silence fell. From Jung Tae-sung, who answers without hesitation, came no reply—and that silence was itself an answer.
“There probably won’t be.”
“Correct. In the current market, no one’s buying used container vessels.”
Major carriers could barely run their own ships—they had no resources for acquiring others.
“Neither private buyers nor government interest seems likely to materialize anytime soon.”
It was the answer I’d anticipated.
Internal decisions could be reached, but attracting buyers depended on the market. With the market dead, even the best decision stalled right there.
“It’s frustrating. The decision was sound, but actually selling is another matter entirely.”
Candidate selection, due diligence, buyer search, price negotiation, contract execution.
Even proceeding normally, the process takes months—and then there’s the Dubai Shock in the second half.
If the sale didn’t close before then, Seonjin would be trapped as before.
“Director Jung.”
“Yes, sir?”
“If there are no buyers, we’ll create one, won’t we?”
Jung Tae-sung looked at me, startled.
“Contact Danny. Tell him to come back to Korea.”

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