Daewoo's creditors to get debt collateral<\/p>\n
SEOUL (AFP): Foreign creditor banks will get US$830 million in
\ndebt collateral set aside by South Korea's crumbling Daewoo
\nGroup, receiving priority over local counterparts, officials said
\nMonday.<\/p>\n
The government-controlled corporate restructuring committee
\nsaid local creditors had decided to pass on to their foreign
\ncounterparts 10 percent of the 10-trillion-won (US$8.3 billion)
\ncollateral provided by Daewoo.<\/p>\n
The decision is aimed at appeasing discontented foreign
\ncreditors before finalizing the government's rescue program for
\nDaewoo, the country's second largest conglomerate.<\/p>\n
\"Six major local creditor banks have already informed the
\nforeign banks of the decision,\" a committee official said, adding
\nlocal creditors would divide the rest of the collateral among
\nthemselves.<\/p>\n
Foreign creditors hold an estimated 10 percent of Daewoo's
\ntotal debt including five billion dollars in borrowing from
\nforeign institutions.<\/p>\n
Foreign creditors did not oppose a debt roll-over but demanded
\npreferential treatment over domestic creditors and a government
\nguarantee.<\/p>\n
Daewoo's officially reported debt reaches 43.4 trillion won at
\nhome and $9.94 billion abroad, with $5.48 billion maturing by the
\nend of this year.<\/p>\n
Local creditors have been under pressure to speed up the
\nrehabilitation scheme, as investors remained nervous over a run
\non funds at investment trusts and other institutions.<\/p>\n
The committee said Daewoo's exact assets, liabilities and
\ncreditor losses would be disclosed next week when due diligence
\ninvestigations on Daewoo are complete.<\/p>\n
But local newspapers, citing preliminary due diligence, said
\ncreditors might incur losses equivalent to between 20 to 50
\npercent of their exposure to core Daewoo units.<\/p>\n
The report rattled the stock market, sending the main index
\nplunging 2.5 percent to 798.84.<\/p>\n
\"What the market had expected (for the loss ratio) was about
\n30 percent. Fifty percent was well above expectations,\" Good
\nMorning Securities Lee Sang-Ho said.<\/p>\n
\"The market will remain weak until due diligence into the
\nDaewoo units is completed.\"<\/p>\n
Analysts fret that the rescue plan could be delayed because of
\ndisputes between investment trusts and others institutions over
\nhow to share losses from Daewoo bonds.<\/p>\n
Many of the country's 24 investment trusts worry they will end
\nup with negative assets or a closure of their business if their
\nshare of losses increases. They insist they must share losses
\nonly within their capital stocks.<\/p>\n
Investment trusts are the largest holders of non-guaranteed
\nDaewoo bonds, triggering fears of massive redemptions when
\ncreditors begin implementing rehabilitation plans for Daewoo in
\nearly November.<\/p>\n
Investors have been skeptical of the government's pledge to
\nprevent a run that would prompt investment trusts to sell stocks
\nand bonds to raise money to pay customers.<\/p>\n
From Nov. 10, customers are guaranteed to redeem 80 percent of
\ntheir investment tied in the form of beneficiary certificates at
\ninvestment trusts which hold unsecured Daewoo bonds worth 25
\ntrillion won by conservative accounts.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/daewoos-creditors-to-get-debt-collateral-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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