I also had read that about half of the debt was being written off but this story indicates that may not be the case (see bold paragraph).
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FOCUS-Ford, 3 Korean firms vie for Kia Motors
August 21, 1998 07:32 AM
By Kim Myong-hwan
SEOUL, Aug 21 (Reuters) - Ford Motor Co F and three South Korean carmakers have lodged bids for crippled Kia Motors Corp and sister firm Asia Motors Co Inc , a Kia spokesman said on Friday.
But General Motors Corp GM , which submitted a letter of intent to bid in July along with the others, did not in the end join the fray, Kia spokesman Kim Sam-sung said.
Ford Motor Co F , which along with its Japanese affiliate Mazda owns 16.9 percent of Kia Motors, was the first to put in a bid as part of a consortium, Kim said.
Samsung Motors, the newest entrant into South Korea's crowded automobile sector, the country's largest carmaker Hyundai Motor and Daewoo Motor also submitted bids by the deadline.
Hyundai Motor, a unit of the Hyundai Group [HYGR.CN], said it made a solo bid after failing to secure partners. But Hyundai officials said it could seek cooperation from other companies, foreign and domestic, if it won the auction.
The winning bid will be announced on September 1.
The Kia spokesman said both Ford and Samsung Motors, a unit of the Samsung Group [SAGR.CN], also handed in bids as part of consortiums.
Unlisted Daewoo Motor Co Ltd submitted a solo bid for Kia, the world's 18th largest carmaker, and Asia Motors, both members of the same business group and both under court receivership, a spokesman said.
The collapse of the Kia Group last year helped tip South Korea into its worst crisis since the Korean War a half-century ago. Former Kia chairman Kim Sun-hong is under trial for embezzlement and the misuse of company funds. Kia's default on its debts was the beginning of a crisis in the banking system that ultimately forced Seoul to turn to the International Monetary Fund for a nearly $60 billion rescue package.
Korea Development Bank (KDB), the two carmakers' main creditor, has said Kia Motors' total liabilities were estimated at 8.75 trillion won ($6.73 billion) at the end of March, against total assets of 7.72 trillion won. Asia Motors had 3.07 trillion won of liabilities, compared with 1.64 trillion won of assets, it said.
The bank had disappointed bidders by saying the consortium of creditors would not write off any of the debt. Instead, the creditors offered to reschedule with longer grace periods and lower interest rates on some of the loans. KDB said the rescheduling would have the effect of reducing the debt by 6.5 trillion won over the long term.
It said the paid-in capital of the two automakers would be cut by 90 percent and then raised to 1.5 trillion won for Kia Motors and 600 billion won for Asia Motors. The bank said the management and control of Kia and Asia Motors would be handed over to buyers who take a minimum stake of 51 percent, which comes to 1.07 trillion won.
Some bidders said they discovered debts that were bigger than expected after scrutinising the books during the bidding process. The two companies were believed to have net debts of some five trillion to six trillion won -- at least double the previous estimates, analysts said. They said the creditors' insistence on selling Kia and Asia Motors together might have also soured interest in the bidding.
Kia Motors said financial considerations -- such as the purchase price, method of financing and how much overseas capital would be brought in -- would not be the sole issue considered in the evaluation of the bids, although they would be the biggest.
It also said the long-term business plans for Kia and Asia Motors would also be considered, as would the benefits to the Korean economy in terms of employment and exports.
($1 = 1,300 won) REUTERS
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