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To: Don Green who wrote (59751)	11/1/2000 10:00:28 PM
From: Don Green	Read Replies (1) \| Respond to of 93625

O.T. ??? `Hyundai Doesn't Get It' Hyundai Group has tried to turn a blind eye to what has been long coming. The result was its brush with fate Tuesday when its holding firm, Hyundai Engineering and Construction, narrowly escaped payment default. Despite the episode, the group apparently has not learned its lesson. A spokesman said, ``The creditors take away whatever cash is available. ``Under these circumstances, we can't but face cash flow problems,'' he said. Asked whether it intends to opt for a debt to equity swap by the creditors, he said, ``No way.'' He claimed that Hyundai Construction is making operating profits so once ``mismatches'' in cash flows are straightened out, it will regain normalcy. Hyundai's reactions by and large show that it considers what is happening to it is not its fault and the creditors are making the problem more complicated. Perseverance was once Hyundai's strong point. Now it appears to be emerging as the cause of its fall. And the markets are still trying to get their message across. Their message is that Hyundai's approach is just a stop-gap measure that could make the problem grow bigger. C.J. Kim of Jardine Fleming said, ``The course has been set but the problem is that Hyundai still doesn't listen.'' The future course for Hyundai Construction propagated by C.J. Kim and other market watchers is clear. His remedy, agreed to by other analysts, is that the creditors, in consultation with Hyundai Construction, should conduct a massive capital decrease before swapping its debts with equity. The outcome would be a Hyundai Construction under the control of the creditors. Another analyst, who wished to remain anonymous, said that Hyundai founder Chung Ju-yung, and his fifth son and successor Chung Mong-hun should cough up their private assets amounting to 300 billion won prior to the creditors-initiated debt for equity swap. Kim welcomed the government's tough stance with some reservations in its latest dealing with Hyundai Construction but cautioned against diverting from the course. He and other analysts believe that, should the Hyundai Construction case be mishandled, it could entail grave consequences. ``The government should stay on course,'' Kim said. ``Should it veer from its path, it could turn Hyundai into another Daewoo.'' Other analysts said that mishandling the Hyundai Construction problem will have adverse effects on the troubled Hyundai Electronics Industries and Hyundai's financial units. ``But I suspect that Hyundai Motor and Hyundai Heavy Industries could be affected due to their mutual ties that have yet to be severed, as shown in the case of the toppled Daewoo Motor.'' But Hyundai faces other flashpoints too. Hyundai's top concern is its three embattled financial units _ Hyundai Securities, Hyundai Investment Trust and Securities, and Hyundai Investment Trust and Management. Hyundai is trying to sell the controlling stakes of the three to the U.S.-based American International Group (AIG)-led consortium at a price of $1 billion. But AIG is demanding a major concession from the government in return, challenging the government's principle of no provision of state funds for a private firm. However, more interesting in the AIG's bid is W. Ross, a vulture specialist which is a member of the consortium. AIG has been the object of attention since its bid for Hyundai Securities was disclosed because it is an insurance specialist, not a securities brokerage. But stock market watchers say that Ross specializes in the takeover, repair and sellback of troubled firms. Its reputation is quite notorious, they said. ``Ross would not settle for unfavorable terms from the beginning,'' one market watcher said. ``Hyundai, however desperate, might be befriending the wrong guy.'' In addition, Hyundai Electronics could be a time bomb ticking fast to the designated time of explosion. Its total debts amount to 8 trillion won with 2 trillion won maturing by the first quarter of next year, a burden that could sag the shoulders of a very healthy corporation. ``Hyundai Electronics could be a bigger problem than Hyundai Construction,'' one market analyst said. Perhaps even bigger than all flashpoints combined is the fact that Chung Mong-hun, Hyundai's new leader, has been absent without leave, spending most of his time away overseas after his group started undergoing difficulties. Chung has been traveling in the United States and Japan to drum up support to help his group ride over the largest storm it has faced, group officials said. ``What could he do, even if he were here?'' a Hyundai spokesman said. But it is natural that Hyundai's drift is related to the long absence of its captain. On his behalf, Hyundai Construction president Kim Yun-kyu and his deputy Kim Jae-soo are running the show. Considering Korea's chaebol management structure, the absence of an owner could spell disarray for rank and file members. Some say that his absence is related to his May 31 vow to quit group management, declared by his father and founder Chung Ju-yung but this speculation doesn't wash, considering the grave danger the group is in. While his son and successor is making himself scarce, his ailing 85-year-old father was said to be attending to the business. Group officials said that the old Chung expressed disappointment at the news that Hyundai Construction failed to meet maturing obligations, calling on his former lieutenants to check up on the situation. oh@koreatimes.co.kr