Tongyang Life Insurance Co., South Korea's fifth-largest insurer, said Sunday it has offloaded all its shares in the troubled holding company, in an apparent bid to tide over falling credibility.
According to the data by the Financial Supervisory Service, the life insurer sold its 4.25 million shares in Tongyang Inc., the de facto holding company of Tong Yang Group, last week at 2.8 billion won ($2.6 million).
The number accounts for a 1.67 percent stake in the holding company of South Korea's 38th-largest conglomerate.
The move came after the family-run conglomerate filed for court receivership of five of its affiliates, including Tongyang Leisure Co. and Tongyang International Inc., on Sept. 30 after failing to repay its maturing debts.
The crisis sparked an outflow of clients from Tongyang Life, which holds a distant connection with the group after it was acquired by a local private equity fund Vogo Fund in 2011 while it retained the original name.
"We offloaded shares in Tongyang to avoid further losses from falling share prices," an official from Tongyang Life said.
Shares of Tongyang came to 488 won Friday, falling 40 percent from 813 won before its trading was suspended on Sept. 30. The trading resumed on Oct. 18.
Tongyang Securities Inc., Tongyang's brokerage arm, currently holds a 3 percent stake in the insurer, with the group's Chairman Hyun Jae-hyun also holding 1,283 shares, the only remaining tie between Tongyang Life and the group.
Tongyang Life also decided to change its corporate name to keep further distance from the troubled group and applied for an official separation at the Fair Trade Commission.
The group's liquidity shortage, meanwhile, has left tens of thousands of individual investors who bought the firm's bonds on the verge of losing their money, prompting a prosecution probe into Hyun for alleged financial fraud.
Hyun is accused of issuing some 156.9 billion won worth of asset-backed commercial papers, a type of short-term debt, in July and September, even with prior knowledge that the firm had lost its ability to pay back its debts and was on the verge of coming under court receivership. (Yonhap News)