IMF loans arrive as more defaults erupt in Seoul

More than 1,000 protesters, including Union leaders, braved chilly, rainy early winter weather to March along a street in central Seoul, demanding that family-controlled industrial conglomerates, or "chaebol", be dismantled and the government take steps to prevent huge job losses they argue would happened under the IMF programme.

The Central Bank of Korea on Saturday said it had received $5.22 billion in rescue funds pledged by the IMF with another $344 million due to flow in on Monday. A bank official said the bank planned to put part of the money in the Seoul interbank market to supply enough dollars for companies to settle import deals.

The rest of the money will be supplied to commercial banks to help them meet imminent, short-term debt obligations, said the official, who asked not to be identified. A second payment of $3.6 billion will be available from December 18, after the first review of a comprehensive economic reform programme underpinning the loan, the IMF said.

If Seoul meets the tough terms of the reform programme, another payment would be made from January 8, bringing the total payments in the first 35 days to well over $10 billion.

South Korea on Wednesday agreed to the $55 billion package, including $21 billion directly from the IMF, to overcome its worst financial crisis in decades. The amount has since grown to more than $57 billion after more countries joined in the plan.

But the first loan payment was overshadowed on the stockmarket by news South Korea’s 12th largest chaebol had applied to the court to protect some of its subsidiaries from creditors. The Halla Group said it has applied or plans to apply forspecial court protection against creditors or court receivership for six of its 18 units, including three core subsidiaries. The companies are Halla Engineering and Construction Co, Halla Cement Manufacturing Corp, Halla Engineering and Heavy Industry Co, Halla Merchant Marine Co, Halla Pulp and Paper Co and Mando Machinery Corp.

The Korea Exchange Bank, one of Halla’s biggest creditors, said the first five units had defaulted on an unspecified amount of debt. State Korean Broadcasting System reported they had defaulted on 221.1 billion worth of promissory notes. The group had 6.34 trillion won ($5.2 billion) of debts at the end of 1996, 19.9 times its shareholders’ equity of 319.2 billion won, data at the Korean Federation of Banks showed.

The troubles, combined with concerns over debt repayments by Kyung Nam Wool Textile Co and Yungjin Pharmacy Co, had a dramatic effect on the stock market.