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KCGI asks Delta what it plans for Hanjin Kal

July 03,2019
Korea Corporate Governance Improvement (KCGI) on Monday called on Delta Air Lines to clarify the purpose of its recent investment in Hanjin KAL, 30 percent owner of Korean Air Lines.

In a letter sent to Delta, KCGI, a local fund and the second-largest shareholder of Hanjin KAL, asked if the U.S. carrier intends to help protect the interests of family of the late Cho Yang-ho, which owns a large minority stake in the company and has managed to maintain control over it.

The Cho family owns 28.94 percent of the company if Cho Yang-ho’s holdings are included.

KCGI owns 15.98 percent.

On June 20, Delta announced that it is acquiring 4.3-percent stake in Hanjin KAL and is planning to increase that stake to 10 percent.

If Delta sides with the Cho family during shareholder votes, the family will be better able to fend off proposals put forward by KCGI.

Shares in Hanjin KAL have declined 26 percent since June 21. Investors dumped the stocks as it was assumed that Delta would support the interests of the Cho family and that KCGI’s efforts to push reform and increase value could be effectively blocked.

But Delta has not made any clear statements about its plans with respect to voting, governance and the Cho family.

“Hanjin KAL jumped over 60 percent from Nov. 15, 2018, when we announced our initial purchase of a stake in the company, to June 20, 2019. But the shares suffered sharp losses since Delta’s stake investment, causing heavy losses for shareholders,” KCGI said in the statement.

The fund said if Delta purchased the Hanjin KAL shares to serve as a “white knight” in Korean Air’s battles against the fund, it may be violating its own principles and obligations.

Delta and Korean Air have worked together closely.

They formed a joint venture last year to collaborate on developing trans-Pacific services, providing access to more than 290 U.S. destinations and over 80 in Asia.

KCGI has asked for a meeting with Delta Chief Executive Ed Bastian in an effort to join forces to monitor Hanjin Kal’s governance structure.

Early last month, KCGI asked a Seoul court to designate an auditor to review a number of issues at the company.

Hanjin KAL said it will follow the law in responding to requests made by the investor.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]