[비즈한국] It has been confirmed that Kim Jun-ki, the founder of DB Group, has ultimately lost his lawsuit against the Korea Development Bank (KDB) to cancel a pledge on his shares. Founder Kim and KDB have been embroiled in conflict ever since the restructuring of the former Dongbu Group. Although Founder Kim argued that he should have the shares, which were used as collateral during the 2014 financial injection into Dongbu Steel, returned to him, the court ruled in favor of KDB, deeming the stock pledge agreement valid. With Founder Kim still unable to clear the collateral years after the sale of Dongbu Steel, the background of his defeat is drawing attention.
The origin of this case dates back to the days when DB Group was known as Dongbu Group. In 2013, Dongbu Group faced a liquidity crisis as the corporate bond market tightened due to large-scale deficits at core affiliates Dongbu Construction and Dongbu Steel, as well as the aftermath of the Tongyang Group crisis. In November of that year, Dongbu Group announced a self-rescue plan involving the sale of major affiliates, capital increases, and private asset contributions by the founder’s family. However, they suspended the independent restructuring and signed a preemptive restructuring agreement with KDB, the lead creditor bank, on December 5.
The restructuring was led by KDB. In April 2014, Dongbu Steel requested an emergency loan of 140 billion won from KDB. This was due to the maturity of 91.2 billion won in bonds with warrant (BW) redemptions for Dongbu Steel. Failure to repay would have resulted in loan recalls and potential default. KDB provided the liquidity by lending 91.2 billion won in operating funds to Dongbu Steel. As the CEO of Dongbu Steel, Founder Kim signed a joint and several guarantee agreement regarding the debt.
In the process of receiving the emergency loan, Dongbu Steel provided the Incheon plant as collateral, while Founder Kim provided his residence in Hannam-dong, Seoul, and some of his own shares in affiliates as collateral. According to the real estate registry, the maximum debt amount for the residence was set at 10 billion won. According to filings by DB Inc., the outstanding loan balance secured by collateral is estimated at 168.9 billion won. However, the exact amount of the loan balance covered by the specific collateral is not verified.
Founder Kim stepped down as CEO of Dongbu Steel in October 2014, taking responsibility for the situation. In November 2014, Dongbu Group sold Dongbu Special Steel to a consortium led by Hyundai Steel for 294.3 billion won and used the proceeds to repay approximately 39 billion won to KDB. Prior to this, in May 2014, Dongbu Steel spun off its Incheon plant to establish Dongbu Incheon Steel. Dongbu Steel was finally sold to a consortium formed by KG Group in June 2019. After acquiring Dongbu Steel, KG Group merged Dongbu Incheon Steel into Dongbu Steel in March 2020. Dongbu Steel later changed its name to KG Steel016380 and assumed the remaining debt.
In January 2023, about four years after KG Group acquired Dongbu Steel, Founder Kim sent a legal notice to KDB demanding the termination of the collateral provision and the stock pledge agreement related to the Dongbu Steel loan. He subsequently filed a lawsuit in April seeking the cancellation of the stock pledge set for the loan.
Founder Kim offered several reasons for requesting the cancellation of the stock pledge. First, he argued that the condition for the stock pledge and collateral agreement was the sale of the Dongbu Steel Incheon plant, and that the contractual condition had been met through the M&A, causing the agreement to expire. He also cited that he stepped down from his positions as CEO and major shareholder of Dongbu Steel in 2014, and became a third party with no involvement in management following the sale to KG Group in 2019.
He also argued that since he stood as a joint guarantor in his capacity as CEO when receiving funding from KDB, and KDB waived his joint guarantee in July 2015, the stock collateral should likewise be lifted. Furthermore, Founder Kim emphasized that the stock pledge set in the loan agreement with KDB was a "limited pledge" securing only the debt at that time.
However, the court's judgment was different. On December 19, 2024, the Seoul Central District Court, which heard the first trial, ruled in favor of KDB. Contrary to Founder Kim’s claims, the court ruled that the stock pledge was a "comprehensive pledge" securing multiple debts, not just the loan at the time. The reasons included the lack of any mention of a "limited pledge" in the contract and the fact that Founder Kim had hesitated to sign the agreement precisely because he was concerned about the comprehensive pledge.
The court also pointed out that the money borrowed from KDB had not been fully repaid at the time the lawsuit was filed. The court ruled, "Unless all secured debts of the pledge are repaid, one cannot claim the termination of the stock pledge agreement barring special circumstances."
Regarding the claim that the condition for termination of the pledge had been met, the court found that the evidence provided by Founder Kim’s side was insufficient. Reasons included that the sale of the Incheon plant was not recorded as a termination condition in the contract and that the sale of the Incheon plant alone could not repay all the debts. Regarding the waiver of the joint guarantee, the court saw it as separate from the pledge. It concluded that while KDB exempted the joint guarantee debt of Founder Kim after he stepped down, it was distinct from a waiver of the pledge itself.
Founder Kim appealed immediately, but lost in the second trial as well. On October 23, 2025, the Seoul High Court accepted most of the first trial's judgment, stating, "The fact-finding and judgment of the first trial are recognized as legitimate." In fact, the second trial favored KDB’s position even more. For instance, while Founder Kim's side argued that KDB chose not to use the Dongbu Steel sale proceeds to repay the debt, the appellate court clarified, "KDB was in a situation where it could not arbitrarily prioritize the sale proceeds to the repayment of the loan while ignoring the interests of other creditors."
Dissatisfied with the result, Founder Kim filed an appeal to the Supreme Court, but the Supreme Court dismissed the appeal on April 30 of this year, ending the lawsuit for the cancellation of the pledge with a final victory for KDB.
Meanwhile, Founder Kim Jun-ki's judicial risks are resurfacing due to conflicts with the Fair Trade Commission (FTC). In February, the FTC filed a complaint with the prosecution against Founder Kim, the designated head of DB Group, alleging that he intentionally omitted 15 entities from the conglomerate designation review to maintain the controlling power of his family and pursue private interests. Although the court issued a summary order for a fine of 150 million won against Founder Kim on April 30, his side rejected it and requested a formal trial.