HHI inevitable loss cutting subsidiaries

Hyundai Heavy Industries (HHI) may take a KRW 22 billion loss if they leave the Hyundai group.

The Hyundai group and Hyundai Asan revealed that Hyundai Asan recorded a net worth of 227.45 billion won.

The result showed that this figure only reached half of Hyundai Asan's capital investment of 450 billion won, meaning that over 200 billion won disappeared due to accumulated deficits and excessive loans after launching its North Korea business.

Now, HHI, together with subsidiary Hyundia Mipo dockyards, possess 24.8% of all Hyundai Asan stock. In order to break away from the Hyundai group, however, HHI must reduce its ownership to less than 15%.

If HHI sells Hyundai Asan 10%of stocks at 5,000 won, its buying price, it will receive about 45 billion won and will then be able to break off from the Hyundai group.

It, however, seems hardly possible that the stocks go for that much. HHI will then have to follow the market and evaluate the stocks' worth. The basic method to evaluate unlisted stocks on the market is by "assets per share", which is net assets divided by total stocks. This leaves Hyundai Asan stocks purchased for 45 billion won worth only about 22.7 billion won, loss of around 22.3 billion won.

A CPA explained that HHI would almost certainly suffer serious hardship in the disposing of Hyundai Asan's stocks.