By Cho Jin-seo
Staff Reporter

The stock-market floating of Samsung Life shares may solve the decade-old dispute on the massive liability incurred from the failure of Samsung Motor, but the enormous interest payment accumulated over the past 10 years remains a critical point of argument at the court.

The dispute over the unpaid debts from the ill-fortuned automobile business has tortured Samsung's creditors as they were paid by Samsung Life shares that they could not liquidate in the market.

The IPO is likely to solve this problem, but it is not yet clear whether the 3.5 million shares they received as collateral would be enough to compensate for both the principal and the interest.

Creditors, including Seoul Guarantee Insurance, had lent to Samsung Motor before it was placed under court receivership in 1999 amid the Asian financial crisis. As criticism mounted of group chairman Lee Kun-hee for the failed investment decision in the automobile business, he gave 3.5 million of his shares of Samsung Life, a core Samsung affiliate, as collateral.

As the listing of Samsung Life on the stock market has been delayed, creditors sued Samsung and Lee that they should pay them back as soon as possible. In 2008, the court decided that the accused owed a total of 3.15 trillion won to creditors, including 2.45 trillion won in principle and 700 billion won in interest, calculated at a rate of 6 percent per year.

Both sides appealed the decision, as they objected to the time value of the loans. Samsung believed that an annual rate of 6 percent was too high, while the creditors demanded 19 percent as they had agreed during the crisis. Samsung refutes that the agreement was made hastily under abnormal pressure from the government, as the whole economy was on the brink of going bankrupt at the time.

According to the creditors' calculations, Lee and Samsung affiliates will have to pay 1.5 trillion won more. In that case, the total amount swells to 4.65 trillion won. At the IPO price, 3.5-million Samsung Life shares, worth 3.85 trillion won, will fall short of that.

Earlier this year, the appeals court has suggested that Lee may offer more shares as collateral, which he has rejected. The case is currently pending.

The Solidarity for Economic Reform, an economic NGO who has been the most prominent critic of Samsung and other chaebol's misbehaviors, insists that the creditors must recoup the loans as much as they can, since it was the taxpayers who funded some of its creditors such as Seoul Guarantee Insurance. According to the group, it received more than 10 trillion won of public funds during the crisis, so Samsung was basically bailed out by taxpayers.

"The creditors' priority is not to make an early settlement. Their job should be to get the maximum compensation," an official of the activist group said Monday.

Even after allotting 3.5 million shares to Samsung Motor creditors, Lee still holds about 20 percent of Samsung Life, valued at around 4.5 trillion won at the IPO price. If he refuses to pay more, then the burden will be passed on to other Samsung affiliates such as Samsung Electronics, who joined in as guarantors to the loan as well.