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Corporate owner families increasing stock-collateralized loans

Oct. 25, 2017 - 09:16 By Yonhap
Corporate owner families have put up some 12.6 trillion won ($11.15 billion) worth of stocks as loan collateral, an analysis showed Wednesday, a practice that increased faster among their children's generation, who likely used the money to pay inheritance-related taxes.

CEO Score, which tracks management details of major conglomerates, analyzed loans and collateral of 704 family members of the top 100 business groups and their affiliates. According to the data, 164 of them from 47 groups had provided their stocks as collateral, totaling 12.63 trillion won. The amount is equivalent to 10.7 percent of the value of their entire share holdings, up 2.1 percentage points from a year earlier.

The proportion of collateralized stocks among children was higher at 15.2 percent, nearly double the 8.7 percent for their parents. This is 3.5 percentage points higher than the previous year.


"Stocks are used as collateral when companies need to buy their own shares for managerial protection, but in case of third- and fourth-generation children, the collateral loans are used to pay for inheritance taxes," an analyst at CEO Score said. "Sometimes, some family members use the collateral loans to create personal funds."

Doosan had the highest rate of stock collateral compared with their share holdings with 93.7 percent, followed by Kumho Petrochemical (85.6 percent), Hyosung (74.6 percent), Dongbu (73.7 percent) and Hyundai (70.7 percent).

Forty-two business groups, including Hyundai Motor, Hyundai Heavy Industries, Shinsegae, Daelim, Kumho Asiana and Hyundai Department Store, did not collateralize any stocks. (Yonhap)