The Grain Has Ripened — Time to Harvest
The acquisition talks between the Seonwoo Group and Duryong Motors had already collapsed beyond recovery.
On top of that, word had spread through the market that a German automaker was taking a stake in Duryong Motors, meaning the company would soon fall into German hands.
In circumstances like these, Lee Tak-hyeon found it impossible to believe that the Seonwoo Group was still trying to acquire Duryong Motors.
Kim Seong-ho, however, knew all too well that this unbelievable development was the truth. He remembered, with perfect clarity, that in his previous life the Seonwoo Group had indeed taken over Duryong Motors.
Ignorant of that fact, Lee Tak-hyeon could only harbor doubts, and those doubts left him no choice but to ask Kim Seong-ho for an explanation.
“So Seonwoo wants to revive a deal that already fell apart? What’s their reason?”
“Because Seonwoo Motors itself needs to grow even larger if it wants to survive.”
“Hmph… You’re not wrong. In the current climate, Seonwoo Motors doesn’t look strong enough to make it on its own. Expanding somehow is the only path to survival… but couldn’t they just acquire Doa Motors instead and try to live that way? There’s no particular reason they have to fixate on Duryong, is there?”
With Doa Motors already on the market, Lee Tak-hyeon still could not shake the question of why they would resurrect a dead transaction just to get their hands on Duryong.
Kim Seong-ho met the chairman’s gaze squarely and answered.
“Because the cart would end up bigger than the horse. Seonwoo Motors is already carrying massive debt; taking on Doa Motors’ liabilities as well would be more than it could bear. One wrong move and the acquisition of Doa could drag Seonwoo Motors down with it. That’s why the Seonwoo Group is going after Duryong, which carries a comparatively lighter debt load. And that is the first reason we must refuse Seonwoo’s proposal.”
Even after Kim Seong-ho’s detailed explanation, Lee Tak-hyeon did not fully agree. If he had been Seonwoo’s chairman, he could see several points that still needed to be settled.
Yet he could not keep circling the same issue forever. The phrase “the first reason” kept echoing in his ears.
“There seem to be second and third reasons as well. Go on, then. Tell me why we must reject Seonwoo’s offer.”
Lee Tak-hyeon regarded Kim Seong-ho with open interest and gestured for him to continue.
Kim Seong-ho moistened his lips for a moment, then laid out the second and third reasons for the chairman.
“Chief of Staff. M Company has downgraded our country’s credit ratings.”
A secretary from the Chairman’s Office hurried up to Hwang Do-beom, who stood waiting outside the chairman’s suite, and delivered the emergency report.
Hwang Do-beom took the paper and scanned its contents.
M Company downgrades Republic of Korea’s long- and short-term credit ratings by one notch each. Outlook revised to negative.
The endless stream of bad news darkened Hwang Do-beom’s expression.
The staffer, watching him stand motionless with the report in hand, asked in mild confusion,
“Aren’t you going inside to report this to the chairman?”
“He ordered that no one is to enter, no matter who comes. So I stay here.”
The staffer glanced discreetly at the closed door of the chairman’s office behind Hwang Do-beom and asked carefully,
“Who’s in there?”
“Director Kim is with him.”
“Director Kim…?”
Within the Ilhyeon Group, few people of director rank ever received a private audience with Chairman Lee Tak-hyeon. And the only person who could keep the Chief of Staff waiting outside while they talked was Kim Seong-ho.
The secretary looked at the door again and murmured,
“Director Kim must be delivering a rather important report.”
“Seems that way.”
Hwang Do-beom already knew the conversation inside concerned the Seonwoo Group, and he could roughly guess its substance. Even so, the fact that he had been left standing outside made him reach a decision.
Before long I should be the one to speak to the chairman first.
If Kim Seong-ho’s position was going to rise anyway, it would be better if Hwang himself were the one to lift him up. That way appearances would be preserved and relations with the newly elevated Kim Seong-ho would remain amicable.
He resolved to propose that the Restructuring Headquarters be placed under the chairman’s direct authority rather than under the Secretariat. At that moment another secretary approached.
“Chief of Staff.”
Hwang Do-beom and the first staffer both turned. The newcomer thrust a sheet of paper into Hwang’s hand and explained why he had rushed over.
“Intraday KOSPI has broken below the 500 line. And U.S. futures are already down more than five percent—people are saying the entire global market is about to crash.”
“It broke 500? The KOSPI?”
“Yes. And that’s not all. One of the major American investment banks has issued a report telling clients to pull their Asian investments and run. They’re calling this only the beginning of the Asian crisis…”
The staffer could not finish the sentence. The weight of what he was saying simply stopped the words in his throat.
Hwang Do-beom stared down at the paper for a long moment, then lifted his eyes to the chairman’s door.
“So the 500 line is gone.”
The KOSPI crash carried a different meaning for him than it did for anyone else.
Where exactly did Director Kim open those KOSPI futures shorts…?
Hwang knew that Kim Seong-ho, currently speaking with Lee Tak-hyeon on the other side of that door, had shorted KOSPI futures. Through the Secretariat he had learned that five hundred billion won had been poured into the position, and he had reported as much to the chairman. But he could no longer recall the exact index level at which the shorts had been entered. Looking at it now that 500 had broken, the entry price seemed absurdly high.
I can’t even begin to estimate how much profit is sitting there.
He shook his head, unable to calculate what five hundred billion had become, and decided he would have to raise the matter of elevating the Restructuring Headquarters even sooner. Carefully he slipped the KOSPI bulletin and the global market summary behind the credit-rating report.
Kim Seong-ho stepped out of the chairman’s office and switched on the phone he had kept powered down in his pocket. He had turned it off so that no call could interrupt his conversation with Chairman Lee Tak-hyeon.
The moment the device came to life, it rang as if it had been waiting for exactly that instant.
“Hello.”
“Director. You’ve finally answered.”
Jo Chung-sep’s voice came through the handset as if he were drowning. Kim Seong-ho stopped walking and stood looking out of the building while he answered.
“From the sound of your voice, something urgent has happened. What is it?”
“Director. The KOSPI just broke 500.”
Kim Seong-ho smiled faintly.
“And that’s why you called?”
“I was so shocked… Director, your account valuation has already passed two hundred billion won.”
“Quite a profit has piled up.”
“‘Quite a profit’ doesn’t begin to cover it. This is historic. No one would believe me if I told them.”
“This is only the beginning.”
“What? Only the beginning?”
Kim Seong-ho resumed walking at a measured pace while he spoke into the phone.
“For a great temple to fall, the collapse of one or two pillars is never enough. Many pillars must give way. Right now only three or four have toppled. More will keep falling, and this country will keep sinking.”
Silence answered him from the other end. Kim Seong-ho’s words struck Jo Chung-sep harder than the news that the KOSPI had breached 500.
Kim Seong-ho reached the Restructuring Headquarters. The place still resembled a marketplace, packed with people begging for loans and others waiting for their applications to be reviewed. They had grown so used to seeing him every day that they no longer reacted when he appeared; they simply sat with exhausted faces, waiting for the Ilhyeon Group’s decision.
He pushed through the crowd and continued speaking into the phone.
“We’ll keep holding until it breaks 400. From that moment on we start closing the position.”
“Four… hundred?”
Jo Chung-sep’s voice sounded as if he no longer had the strength left to be surprised.
Five hundred and four hundred might look like only a hundred-point gap—the same as the difference between one thousand and nine hundred. In reality the two gaps were as different as heaven and earth. Measured as a percentage, one thousand to nine hundred is a mere ten percent; five hundred to four hundred is twenty percent. Because the index is based on market capitalization, the ratio is what matters.
In other words, speaking of four hundred after five hundred had already broken meant another twenty percent of corporate value would vanish. The market had already been cut in half from one thousand, and Kim Seong-ho intended to wait for yet another twenty percent wipeout before beginning to exit. Jo Chung-sep had no idea how to respond.
Kim Seong-ho’s tone remained matter-of-fact.
“Truthfully I’d prefer to start closing the moment it breaks three hundred, but the account has already swollen so large that liquidation won’t be simple. So we’ll take our time and unwind it calmly.”
“You were planning to close at three hundred? Director, five hundred broke today. When you casually mention four hundred and three hundred, I honestly don’t know what to make of it…”
Kim Seong-ho entered his office and explained as he walked.
“Take the numbers exactly as I give them. Today it broke five hundred. Not long from now it will break four hundred. In the end it will almost certainly go below three hundred as well, but I intend to begin a rough exit the moment four hundred falls. Just remember that.”
While speaking he opened the leather-bound diary lying on his desk.
…The KOSPI index plunged again and again until it finally bottomed at 277. Countless companies collapsed…
He confirmed that the figure matched his memory, then turned and perched on the edge of the desk while he spoke once more into the phone.
“When four hundred breaks, don’t be shocked the way you are today. We still have work to do.”
“Yes, sir. I understand.”
Jo Chung-sep quickly steadied himself, promised to remember the instruction, and ended the call.
Kim Seong-ho remained seated on the edge of the desk, set the phone down, and picked up the leather diary again, turning the pages with a detached gaze.
When the exchange rate soared, the government decided to raise oil prices. The moment the announcement was made, cars lined up for miles at gas stations, people desperate to fill their tanks before the hike…
He turned another page.
The consumer economy took a devastating blow as well. Department stores and every kind of retail company toppled like dominoes. No one came to the markets…
When the stock market collapsed, the government tried to stabilize it by raising the foreign ownership ceiling. But foreign selling never stopped. Merely expanding the limit could not hold back investors who were already leaving…
A report came out that the Republic of Korea’s foreign-exchange reserves had fallen below two billion dollars. Rumors that intervention had been suspended, and news that the country had simply run out of dollars…
The IMF Managing Director declared that Korea was not facing the same crisis as the Southeast Asian nations. Newspapers and the rest of the media predicted that credit ratings would soon recover, but reality was different. The exchange rate kept soaring and the stock market continued its historic freefall. No one knew where the bottom lay…
Kim Seong-ho turned the pages of the diary that recorded the future with indifferent eyes.
Deputy Prime Minister Kang told a press conference that he would try to borrow dollars from the United States and other allied nations. The papers twisted his words into a claim that the allies had already agreed to lend the money. No one believed it. Even we at Ilhyeon took Kang’s statement with deep skepticism and threw everything into securing dollars, yet…
His eyes fell on a passage about the Ilhyeon Group of those past days.
Securing dollars proved far from easy. When Father-in-law came home he smashed the furniture in a fit of rage. The eldest brother’s household seemed no better. Everyone except the eldest brother himself had fled to Pyeongchang-dong, but the sight of the wrecked furniture made them turn around without staying. In that atmosphere I could do nothing but hide, barely able to breathe…
Kim Seong-ho’s hand stopped on the page that told his own story from that time.
“Yes. Back then I couldn’t even breathe. All I wanted was for the moment to pass as quickly as possible.”
In those days the Ilhyeon Group, like everyone else, had failed to obtain dollars. The group had thrashed desperately for survival amid the credit crunch.
This time was different.
A knock sounded and a headquarters staffer stepped inside.
“The Bank of Korea has inquired whether we can lend them the dollars we hold.”
Kim Seong-ho closed the leather diary with a smile.
“The Bank of Korea is asking us for a loan?”
“Yes. They’re begging us to lend them even ten billion dollars if we have it. They also asked that if we bring in any more dollars from overseas, we lend those as well. What should we do?”
“What interest rate are they offering?”
“The base rate plus a one-hundred-basis-point spread.”
“A hundred basis points is only one percent.”
“That’s correct.”
Kim Seong-ho’s face twisted into a derisive smile. He slid off the desk and spoke to the staffer waiting by the door for instructions.
“Tell them we’ll lend twenty billion dollars if they give us a thousand basis points.”
“A thousand basis points?”
The staffer wondered whether he had misheard and asked again. The same figure left Kim Seong-ho’s mouth.
“Unless they add a ten-percent spread, there will be no loan. And make sure they understand that if they take our dollars, we will no longer be able to lend money to other companies. Tell them: we’ll lend if they want it, but the market liquidity we have been providing will stop. The choice is theirs.”
If the Bank of Korea borrowed the money, Ilhyeon would stop lending to corporations. Those corporations would then turn their resentment on the central bank. The message was clear: knowing that, do you still want the dollars?
The staffer grasped the intent, answered that he understood, and left the office.
Unlike the past, even the Bank of Korea now had to come begging to the Ilhyeon Group for money. And every piece of this situation had been engineered by Kim Seong-ho.
Still looking at the door through which the staffer had vanished, he rested a hand on the leather diary and murmured to himself with a light smile.
“I sowed the seed and fertilized the field. The grain has ripened. Time to go harvest it.”
The Ilhyeon Group’s granaries were already overflowing, and high levees had been raised so the coming waves could not sweep them away. Yet simply avoiding danger was never what Kim Seong-ho wanted.
He intended to pick the fruit that had grown on the great tree nourished by that very danger. Only then would his influence within the Ilhyeon Group swell still further.
With the roar of the approaching typhoon as his music, Kim Seong-ho advanced, step by deliberate step, toward the next stage.