Daewoo agrees to pare down to focus on autos<\/p>\n
SEOUL (AFP): South Korea's second biggest conglomerate Daewoo
\nGroup agreed Monday to shed three quarters of its debt-ridden
\nempire to focus on its auto business in a last-ditch bid to
\nsurvive.<\/p>\n
The conglomerate, or chaebol, bowed to pressure and signed a
\nlong-awaited pact with creditors to sell off all but six of its
\n25 units by the end of the year in a bid to raise desperately
\nneeded cash to offset its massive debts.<\/p>\n
The agreement set a strict timetable for the reform-shy group
\nto separate its most profitable subsidiaries and sell them off,
\nleaving only its key auto-related units, the Financial
\nSupervisory Commission (FSC) said.<\/p>\n
\"Daewoo Group will be reduced and reorganized as a
\nconglomerate specializing in the auto industry with a total of
\nsix subsidiaries, four of which are auto-related, while the other
\ntwo units support them,\" the FSC said.<\/p>\n
The unraveling of the 32-year-old giant will leave the group
\nwith Daewoo Motor Co., Daewoo Motor Sales Co., Daewoo Telecom,
\nDaewoo Capital Co., Daewoo Corp.'s trading arm and Daewoo Heavy
\nIndustries' machinery division.<\/p>\n
The move leaves Daewoo, wallowing in more than 51 billion
\ndollars of debt, to recreate itself as an auto giant, the FSC
\nsaid.<\/p>\n
Under the plan, Daewoo yielded to demands that it sell its
\nmoney-spinning securities brokerage, its investment trust firm
\nand its construction business along with Daewoo Electronics and
\nits shipyard.<\/p>\n
The six remaining units will have total assets of 56 trillion
\nwon (US$46.6 billion), equity of 23 trillion won, debts of 33
\ntrillion and a debt-to-equity ratio of 196 percent, financial
\nwatchdogs said.<\/p>\n
Creditors will initially take over the chaebol's cash cows,
\nDaewoo Securities Co. Ltd. and Seoul Investment Trust Co. Ltd.,
\nbefore selling them off, to avoid disruption to financial
\nmarkets.<\/p>\n
Daewoo Securities, the group's main source of financing, must
\nbe handed over by the end of September, creditors said, along
\nwith Daewoo Heavy Industries' shipbuilding operation.<\/p>\n
If the group fails to observe the bank-designated deadlines
\nfor divestment of the units, creditors will start liquidation of
\nthe units and initiate workout proceedings or collateral sales.<\/p>\n
But financial watchdogs said the ultimate fate of the group
\nlay in its negotiations with U.S. giant General Motors Corp. (GM)
\nover a strategic alliance with Daewoo Motor.<\/p>\n
Daewoo is currently in talks with GM which could reportedly
\nlead to the sale of a majority stake in Daewoo Motor for an
\nestimated $3.5 billion.<\/p>\n
If the deal goes ahead, Daewoo will become a trading firm
\nwhose survival will depend on the progress of restructuring, the
\nFSC said.<\/p>\n
The process of disbanding Daewoo began in earnest Friday when
\nthe group agreed to sell Daewoo Electronics Co. Ltd. to a U.S.
\ninvestment firm for $3.2 billion, a process that must be
\ncompleted by end-September under the plan.<\/p>\n
Creditors have been charged with carefully monitoring the
\ngroup's progress in selling off key subsidiaries following
\ndisagreements between the authorities and the group over the
\nschedule for the sales.<\/p>",
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