SKM files for bankruptcy but trades on

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Exclusive to travelretailworld.com and DFNI: By Anna Fenton

Prominent South Korea duty-free operator  SKM has filed for bankruptcy and sold its store at the Sheraton Walker Hill Casino. But it is optimistic that its Hotel Intercontinental outlet (trading as Coex Intercon Duty Free) will continue in business.

SKM said the action was necessary because of the continuing losses of its consumer goods subsidiary, Dongsan C&G, which it has managed since its acquisition in 1993. SKM is burdened by $77m of Dongsan's debt, explained SKM Duty Free manager/buyer Young Hak Lee.

"Supporting this subsidiary has been a great burden," he said. "To  survive, we sold one of our duty-free shops two weeks ago, at the Sheraton, to Walker Hill, just before the bankruptcy was announced on Tuesday [last week]."
 
 "This [bankruptcy] was the only way for SKM to lawfully sever its ties with Dongsan," said vice-president and general manager SKM Duty Free, TS Kim. "SKM is a profit-making company which has suffered a financial crisis due to the snowballing deficit  of another company. It will go under legal management which will allow SKM to reform its financial situation and continue business operations normally.

"Our lawyers are positive that the government will be swift in its decision to accept our receivership since SKM is a financially sound company."

Under Korea's financial reform laws, SKM should be able to continue trading under government supervision, by using the bankruptcy status to cut its ties with Dongsan. Korean financial institutions are  under government pressure to speed up reform and put a credit squeeze on non-performing loans.

Editor's note: The Hugo Boss shop in the Sheraton Walker Hill Casino is understood to be trading as usual. And the proposed SKM Hugo Boss outlet at the new Inchon international airport which opens in April 2001 is not affected by the current action, as the joint-venture operation there is  90%-owned by another company, Aegon.