Daewoo seeks loan rollover

SEOUL, JULY 31: South Korea's embattled Daewoo Group said on Friday it was seeking roll-overs of $ 9.9 billion in foreign debt, while loc...

SEOUL, JULY 31: South Korea’s embattled Daewoo Group said on Friday it was seeking roll-overs of $ 9.9 billion in foreign debt, while local creditors began work to restructure the group’s debt and to sell its assets. The group wrote to over 60 foreign creditors on Friday afternoon seeking roll-overs and restraint in calling in loans.

"We will request you to roll over the upcoming maturing loans until a full restructuring plan is presented to our lenders," Daewoo Group spokesman Moon Ki-hwan quoted the letter as saying. "We will seek an independent financial adviser to guide us in drafting a restructuring plan," Daewoo said in the letter. "We’ll keep our communication channels open with all of our creditors," he said.

Daewoo would promptly provide the creditors with an overview of its financial condition. A highly recognised international accounting firm would prepare the overview. The group officials gave no further details on the letter.

Story continues below this ad

Foreign creditors hold about 20 per cent of Daewoo’s 57 trillionwon ($ 47.5 billion) in debt, foreign bank officials said. The Financial Supervisory Commission has said some $ 5.5 billion of Daewoo’s foreign debt matures by the year’s end. Some foreign bankers have complained they have been ignored by the government. They have also said that while Daewoo has pledged collateral against its loans with local creditors, it hasn’t done so with foreign banks.

Daewoo has refused to reveal who its overseas creditors are but a source close to the company said the group had borrowed money from almost every big-name bank in the world. Foreign creditors, who had considered calling in loans to Daewoo, held their first formal talks with the government since the liquidity problem surfaced at the nation’s second-largest conglomerate last week.

The officials told foreign bankers the government and Daewoo would treat the creditors in accordance with laws and regulations but Daewoo was directly responsible for resolving its problems with foreign creditors.

South Korean stocks andbond prices tumbled on Friday on rumours that Daewoo would be unable to deal with its foreign debts. The Korea Composite Stock Index fell 2.9 per cent to close at 969.72 points and the three-year corporate bond yield rose 16 basis points to end at 9.22 percent.

Story continues below this ad

Meanwhile, six South Korean banks began work on Friday to restructure Daewoo Group’s debt and sell off its assets, leading creditor Korea First Bank said. Other members of the task force are Hanvit Bank, Korea Exchange Bank, Chohung Bank, Korea Development Bank and Seoulbank, it said. The task force team would comprise 20 employees from the six banks, with Korea First Bank forming the bulk of the team.

Local creditors on Monday gave the group an emergency transfusion of four trillion won ($ 3.4 billion) and agreed to extend the maturities of its bonds and commercial paper in return for 10 trillion won ($8.5 billion) in collateral from Daewoo and its founding chairman.