Ilhyeon Group made the decision to give up the 300 billion.
That it would provide no support of any kind to the Dubo Group and would follow the creditors’ decision — in that roundabout phrasing, it conveyed, sidelong, that it would write off the 300 billion invested in Dubo Steel.
People looked at Ilhyeon Group with astonished eyes. Because when it was only natural to begrudge even 3 billion won, cutting away a huge sum like 300 billion struck them as extraordinary.
And at the measure that followed, people clicked their tongues in amazement.
“Chairman Lee of Ilhyeon Group’s second son came down from the Ilhyeon Construction presidency?”
“Seems the one who pushed this Dubo Steel investment was that second son. That’s why they suddenly announced a dismissal outside the presidents’ reshuffle season.”
“It’s a dismissal, right? Not a move to another affiliate or… something like that?”
“It’s a dismissal. A dismissal. He got sacked.”
“Well, I never…”
Having sat in the Ilhyeon Construction presidency more than five years, the prevailing view had been that the construction line would pass to the second son, Sang-jong. Yet hearing that he hadn’t been moved to another affiliate’s presidency but sacked, no one could hide their surprise.
“So now the Ilhyeon Group succession is settled on the eldest?”
“Just about… wouldn’t you think?”
“As the eldest son he’s furthest ahead on standing, and the seat he holds now is the highest of the siblings’… Hasn’t Vice-Chairman Mun-jong, the eldest, been decided as the next chairman…?”
“So Ilhyeon can move into the succession process now?”
“They’ll start before long. With even the second son cleared out, they can’t leave the next seat empty forever.”
The people talking it over all nodded. With Sang-jong stepping down from the Ilhyeon Construction presidency over the Dubo Steel matter, the thought that the succession process would now begin surfaced in every mind.
But contrary to what people thought, Ilhyeon Group couldn’t devote itself to the succession.
Home late in the evening, Gyeong-eun flopped into a chair with a weary face.
Seong-ho, who’d been studying the leather diary until she arrived, left it open and came over to her. Kneading her shoulders, he tried to work out her fatigue.
“Sounds like you had a lot of work at the company today?”
At his touch, Gyeong-eun softly closed her eyes and answered. “The hotel’s numbers have been poor lately. And on top of that I’ve got to fill the hole from the money handed over for the Dubo Steel investment…”
She opened her eyes, looked up at him kneading her shoulders, and said, “Honestly, the numbers being a little off I could bear. But the money we put toward the investment suddenly vanishing — filling that has me run off my feet. On top of already struggling with so few guests lately…”
At her grumbling, Seong-ho sat down beside her. Taking her hand and patting it, he asked, in a calm voice, about Ilhyeon Hotel’s current state. “Have guests dropped a lot?”
Gyeong-eun wore an embarrassed look and nodded. “Compared to when you handed it over, revenue’s fallen more than 10%.”
“What’s the reason?”
“Overnight guests are down more than 20% year on year. It’s thanks to the food-and-beverage side holding up that we’re weathering it even this well — without that it’d have been much harder.”
“Why do you think the overnight guests fell away?”
“The economy seems quite bad. Guests have started closing their wallets. And so I wonder if places like hotels, which do well when guests’ wallets are flush, are the ones that struggle.”
“The economy’s bad, is it…”
Seong-ho slowly repeated her words.
At present the Republic of Korea was in turmoil from the Dubo Steel matter that had begun at the year’s start and the president’s-second-son scandal. Amid the sudden situation, consumers had begun closing their wallets, tightening their belts, and watching to see how things went. And so businesses like hotels, greatly tied to the state of consumers’ pockets, couldn’t help but struggle.
Still, trying not to lose hope, Gyeong-eun put on a smile. “But once the Dubo Steel matter is resolved, it’ll get a bit better, right?”
“Hmm…”
Seong-ho folded his arms and sank into thought a moment. At the sight, Gyeong-eun felt uneasy.
“It… won’t?”
Sunk in thought a moment, Seong-ho asked, still with his arms folded, “What’s Ilhyeon Hotel’s funding situation like right now?”
At the sudden question, Gyeong-eun looked at him a moment. But seeing his serious face, she stopped thinking for the moment and answered first. “It’s not good. As I said earlier, the coffers are empty from the Dubo Steel investment. We need to fill the coffers to respond to what’s ahead, but… it’s not that way — it’s a precarious state.”
“And the loans? Have you cleared a lot of them?”
“Yes. After you told me to, I’ve reduced them a good deal.”
“Well done. Things are going to get much worse ahead, and if loans had piled up on top, a situation could have unfolded that shackled both Ilhyeon Hotel and you, Gyeong-eun.”
“Sorry? Things getting much worse?”
Gyeong-eun wore a bewildered look at the talk of things getting worse. In a situation where the economy was already reeling from the Dubo Group affair alone, hearing it would get worse struck fear into her.
Seong-ho unfolded his arms and, out of the corner of his eye, studied the open leather diary.
[Bumi Special Steel insolvent, [x] month, 19xx]
Written in the leather diary was the name of a company that would soon go insolvent. And the names of firms that followed after caught Seong-ho’s eye.
He let out a small sigh and looked back at Gyeong-eun. Then, in a calm voice, he began to tell her about the situation ahead.
The Dubo Group affair, which had set the Republic of Korea abuzz from the start of the year, entered a lull of sorts.
People erased the tumultuous mood of the year’s start and tried to resume a lively start to the year, late as it was. And just as they sought to lift the mood along with spring’s returning warmth, unexpected news arrived.
[A Second Dubo Affair — Bumi Special Steel Insolvent]
Like the Dubo Group, the Bumi Group — which took steel as its mainstay — met with insolvency. Because its bad debt had deepened due to the Dubo Group insolvency, its main creditor Jaei Bank, citing an unclear outlook for loan recovery, refused additional support lending, and unable to settle some 800 million won in notes, it was processed into final insolvency.
The scale of loans Bumi Special Steel had received from Jaei Bank was said to exceed 400 billion. And of that, around 240 billion was said to have been lent on credit, without any collateral. With the Bumi Group going insolvent, Jaei Bank lost all 240 billion, and the mood that had been trying to revive sank in an instant.
The composite stock index dropped its head and broke below the 900s, and the exchange rate shot clean past 900 won.
Watching the situation flow ever more toward the bad, Chung-seop clicked his tongue and reported to Seong-ho. “Director. After Bumi Special Steel, Dubo Construction has gone insolvent too. There’s talk in the market now about whether every last Dubo Group affiliate is going to go under.”
“That’d be so.”
Drinking his tea, Seong-ho listened to Chung-seop’s account with a calm expression.
At the sight, Chung-seop clicked his tongue inwardly. That’s the face of a man who was expecting it, isn’t it?
Even at astonishing news, Seong-ho kept his composure, wearing the face of a man who knew everything. Thinking it a marvel how he could know such things, Chung-seop went on. “With Dubo Construction going insolvent, its main creditor Jaei Bank is pushing for a third-party acquisition after court receivership, and Soseong Timber, one of the Dubo Group affiliates, has entered sale proceedings too.”
At that, Seong-ho curled the corner of his mouth up. “Is there anywhere that’s sounded out an intent to acquire?”
“So far… there’s none, they say.”
“Jaei Bank must be burning up inside.”
“Yes. And so…”
Chung-seop glanced around a moment. He knew there was no one in the office besides the two of them and no one who might come by, but glancing around had come out naturally, out of caution. “Because of these problems right now, there’s concern arising in American banking circles about whether Korean banks might go bankrupt.”
“You mean talk of Jaei Bank going bankrupt is going around?”
“Yes.” Chung-seop nodded emphatically and spoke in a lower voice still. “Dubo and Bumi both have Jaei Bank as their main creditor, don’t they? Between the several hundred billion lent without collateral and the concern that even on the 1.5 trillion secured with collateral, the collateral won’t cover the loan amount, Jaei Bank’s credit rating has plunged — to the point that borrowing is hard even at high rates, so there’s actually a move to pull funds out of it.”
“So the problems are bursting first in the transactions between banks.”
“Yes. The financial sector is the most sensitive to move, after all.”
Wearing a troubled look, Chung-seop went on. “So there’s a rumor going around that there’s a strong chance the US central bank applies the measure it took during the Mexico affair to us as well.”
A rumor of Korean bank bankruptcies, followed by a rumor of the US central bank applying its Mexico-affair measure.
A faint smile hooked itself onto Seong-ho’s face, and Chung-seop — not seeing it — spoke to him in a heavy voice. “Three or four years ago, when the Mexican peso lost over 60% of its value in a few months and the Mexican government couldn’t halt the fall, so its economy ended up rotting right down to the roots, didn’t the US central bank support 50 billion dollars through the IMF, trying to keep the Mexican economy from collapsing?”
“And they mean to do that to us too?”
“In the worst case.”
Chung-seop shook his head, thinking such a thing must never happen. “The reason the US central bank helped Mexico wasn’t to save Mexico. It supported it to help the investors who’d invested in Mexico get out. So now that every investor has pulled out… Mexico’s economy has reached a state beyond saving. It’s past recovery.”
Chung-seop recalled Mexico, which had once lived several times better than Korea. That Mexico now suffered, its economy collapsed. Feeling a chill run down his spine at the thought that Korea too could fall into such a state, he said, “It’s rumor on rumor, so I don’t think it’ll come to that — but the situation right now doesn’t seem entirely positive. What kind of place is Jaei Bank? It’s one of the top handful of banks in the country. For a place like that to be reeling from blow after blow, this concern-laced talk that its impact might spread beyond other banks to shake the whole country is coming out of America.”
He stopped a moment and shook his head. Then, easing his dark expression and forcing a smile, he said, “Still, this is all just talk of possibilities. In fact, there’s no guarantee Korea becomes like Mexico just because Jaei Bank fails, and isn’t that unlikely anyway? The US central bank isn’t saying it’ll definitely come to that, only that we should keep the possibility open too — so maybe I’m thinking too pessimistically.”
“Right. With just something like Jaei Bank, it’s hard for such a thing to happen.”
Seong-ho smiled at Chung-seop, trying however he could to see the situation positively. “That’s right. It won’t come to that. Becoming like Mexico would be a disaster.”
“What I mean isn’t that it won’t come to that — it’s that Jaei Bank failing alone won’t be enough. If two or three more collapse beyond Jaei Bank, it’s plenty possible.”
“Sorry? What do you mean by that…”
Chung-seop opened his eyes wide, not understanding.
Seong-ho smiled at him. “That, you can think about later, for now… How’s my account?”
At the question, Chung-seop came to himself and gave the account’s status. “With Bumi collapsing on the heels of the Dubo affair, the composite stock index broke below 800 and fell. So… for now, the return has passed 100%.”
“So you’re saying my account’s total has topped 100 billion?”
“Yes. As of yesterday’s close, it stands at a record 104 billion.”
Chung-seop answered and looked at Seong-ho with awe-filled eyes. He hadn’t imagined posting such a large return in so short a time. And at the sight of Seong-ho picking the bones clean with a naked position, Chung-seop was left dumbstruck.
Yet even this seemed to stir little in Seong-ho.
He nodded and rose. Leaving word to keep carrying the situation forward, rolling over the position without unwinding, he made to leave Chung-seop’s office.
“Oh, right.”
Before stepping out, Seong-ho offered Chung-seop one piece of advice. “CEO Jo. Don’t move with the conviction that it won’t become like Mexico… I recommend always responding with every possibility kept open.”
“Keep every possibility open?”
Seong-ho smiled lightly at the wide-eyed Chung-seop. “Because a lot of things people believed could never happen are happening. If you turn away from the start, insisting it couldn’t be so, then when it does happen later, you won’t be able to respond.”
He gave Chung-seop a broad smile. “You won’t quite understand what I’m saying right now, but… as much as you’ve come this far trusting me, I’m asking you to trust me once more this time too. Well then…”
Seong-ho hadn’t said precisely what to trust or how. But Chung-seop could tell what he meant. Because Chung-seop had judgment quicker than anyone. And that quick judgment was ringing an alarm bell in his head.
(End of Chapter 71)