Disappearance of 240 billion won from SK Shipping

As much as 240 billion won has disappeared from SK Shipping Co., the shipping arm of the scandal-tainted SK Group. In addition, it was disclosed that the company extended a loan of 53 billion won to a third party only known as "the person concerned" but failed to collect on the loan.

The market estimates that the money was used to help SK Group affiliates, including SK Global. However, SK Shipping Co. currently refuses to disclose its accounting books which contain crucial loan information.

Last year, SK Shipping posted an operating profit of more than 70 billion won, but eventually recorded a loss of 220 billion won because of such loans it extended.

SK Shipping`s unclear financial transactions and its alleged accounting fraud in the wake of the SK Global scandal are likely to have a negative impact on confidence in the whole SK Group.

290 billion won funneled from company

According to the 2002 independent auditor`s report released by SK Shipping`s auditor Samil Accounting Corp. the company raised 239.3 billion won by issuing CP, lent the money to a certain party and entered the item as a short-term loan in its accounting books.

At year`s end, it was treated as a loss.

As SK Shipping still refuses to give an explanation as to whom it extended the loan, Samil Accounting Corp. expressed its qualified opinion in its auditing report on Thursday.

According to the audit, the company extended a loan reaching 20% of its 1.1 trillion sales and treated it as a loss. This certainly constitutes accounting fraud.

Moreover, after SK Shipping extended a loan of 60 billion won to "the party concerned," it collected 9 billion won and treated the 52.9 billion won, including overdue interest, as a loss. Samil Accounting Corp. is now focusing on how the 290 billion won leaked from the company.

The banking system believes that the money was used to support SK Global but it does not rule out the possibility that it was used for other purposes.

There was another revelation that it drew 29 bills on another party concerned but later collected it and rid itself of all the bills. There is suspicion over how large the financial transactions were between SK Shipping and SK Group`s other affiliates.

Can SK Shipping overcome its current liquidity crisis?

Samil Accounting Corp. says that if it does not pay back its short-term borrowings of 293.5 billion won that mature in the first half of this year, it will find itself in difficulties.

Regarding this, SK Shipping explained it would pay back some of its debt with operating profit or ask creditors to roll over some of them. At the same time, it said that SK Corp. and SKC would issue new shares worth 100-150 billion won in order to help it increase its capital. However, because foreign investors, controlling shareholders of SK Corp., say that they will not offer assistance to ailing affiliates, the possibility of an increase in capital is still not clear.

An official with one of SK Shipping`s creditors said that because SK Shipping`s short-term borrowings were reduced to 198 billion won, but the company has only 85 billion won in cash, rollover is necessary. He also says that because the whole SK Group`s credit rating is falling, it remains to be seen whether creditors will roll over the loans.

Meanwhile, the Financial Supervisory Commission (FSC) says that it will ask the Korea Institute of Certified Public Accountants to supervise the company because it is a non-listed company, and will look into its connection with SK Global in the process of the larger investigation.

Do-Young Kim Myung-Jai Lee nirvana1@donga.com mjlee@donga.com