Hyundai faces
bankruptcy deadline
Unions are angry at the thousands of job cuts
The Hyundai Engineering Company is teetering
on the edge of bankruptcy.
For the second week in a row, one of Korea's
flagship companies faces collapse and is forced
to ask its creditors for mercy.
Hyundai says that "foreign creditors have been
asked to extend the maturity of $80 million
dollars of bonds with warrants due on
Monday," but claims it can meet the $35m in
loans due to domestic Korean suppliers.
The state-owned Korea Exchange Bank, which
is Hyundai's largest creditor, says the company
owes it $2.6bn in debt, and has further
borrowings of $4.4bn.
Last week creditor banks agreed to roll over
more than $700m worth of debt until the end
of the year, in order to allow the company to
raise more money.
But the banks have threatened to take control
of Hyundai if it fails to meet that deadline.
Korean Finance Minister Jin Nyum told the ailing
company that it would be forced into court
receivership or to accept the debt-for-equity
swap, if its fresh reform plans proved
unsatisfactory.
Reforming the chaebols
The Korean government and foreign observers
believe that the giant Korean companies, or
chaebols, who got into financial trouble by
over-borrowing during the Asian crisis, need
drastic restructuring.
But attempts to slim them down, as in the
case of Daewoo Motors, has led to fierce union
resistance - and a reluctance by foreign firms
to step into the breach.
Last week Daewoo was put into receivership
by its creditors, a move which may ultimately
make it more attractive to prospective foreign
buyers like GM, who are still investigating a
possible purchase.
On Sunday Korean trade unions demonstrated
against the planned 3,500 job cuts at Daewoo
if the restructuring plan goes through.
Hyundai is the largest of Korea's family-run
conglomerates, but a rare family dispute is
adding to its troubles.
Brothers fall out
Chung Mong-Hun, who heads Hyundai
Engineering,, has called for financial help from
his brothers and relatives who control other
Hyundai affiliates - partly in order to avoid
having to sell his own stake in the company.
But Chung Mong-Koo,
chairman of Hyundai
Motors, the country's
largest automaker, and
eldest son of group
founder Chung
Ju-Yung, has rejected
giving financial
assistance to Hyundai
Engineering.
The brothers have
been at odds after
their father chose
Chung Mong-Hun as his
successor to the throne of the remnants of
the vast Hyundai empire. Hyundai Motors
became a separate company on 1 September.
The refusal by Hyundai Motor to give Hyundai
Engineering a helping hand was seen as a
setback to the company's efforts to scrape up
fresh cash to avoid bankruptcy by the end of
the year.
The construction firm is hoping to sell off a
huge parcel of reclaimed land in Sosan to help
pay off its debt.
But analysts are sceptical that it can raise
enough to retain family control.
"The reason why they failed to meet the
target was not because they were slow in
implementing but because they proposed
measures they could not carry out," said one
analyst at a foreign brokerage.
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See also:
07 Nov 00 | Business
Daewoo close to
collapse
06 Nov 00 | Business
South Korean strike
threat
31 Oct 00 | Business
More trouble for
Korea's chaebol
08 Aug 00 | Business
Hyundai under
pressure
27 Mar 00 | Business
Hyundai torn by feud
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