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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] Seoul, July 16 – CJ Group has challenged the Korean Fair Trade Commission’s (KFTC) decision to impose corrective measures and fines totaling KRW 6.54 billion (approximately USD 4.7 million), denying allegations that it unfairly supported financially distressed affiliates and distorted market competition.
On July 16, the KFTC announced it had levied penalties against CJ Corp., CJ Logistics, CJ CGV, and CJ 4DPLEX (formerly Simuline) for violating the Fair Trade Act by allegedly providing undue financial support to group companies in financial difficulty.
According to the KFTC, in 2015 CJ and CJ CGV entered into Total Return Swap (TRS) agreements with financial institutions to strengthen the creditworthiness and facilitate low-interest issuance of perpetual convertible bonds by CJ Construction (now CJ Logistics) and Simuline (now CJ 4DPLEX). The TRS structure allowed CJ Construction to raise KRW 50 billion and Simuline KRW 15 billion.
TRS is a derivative contract in which the parties exchange cash flows derived from an underlying asset, such as stocks or bonds, over a set period.
The KFTC argued that the financial assistance constituted a form of unfair internal support, particularly because CJ Construction and Simuline were suffering from ongoing net losses and capital erosion during 2010–2014 and 2013–2014, respectively. At the time, CJ Construction held a low credit rating of BBB+, while Simuline had no credit rating at all, making it difficult for them to independently raise funds in the market.
CJ Group refuted the commission’s claim, stating, “While the subsidiaries experienced temporary liquidity issues, they were not in severe financial distress as alleged. Moreover, our actions did not hinder fair competition in any way.”
The group added that it is currently reviewing the KFTC’s decision and will consider all legal options available.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
