Park Chan-Kyong
\nAgence France-Presse
\nSeoul<\/p>\n
Creditors have decided to put SK Global, the ailing trading
\narm of South Korean conglomerate SK Group, under court
\nreceivership for liquidation, a spokesman for top creditor Hana
\nBank said Wednesday.<\/p>\n
The liquidation of SK Global, whose fraudulent bookkeeping
\ntriggered a liquidity crisis in March, could lead to the break up
\nof the country's third largest business group, analysts said.<\/p>\n
SK Group's patriarch, Chey Tae-Won, has been in prison since
\nFebruary for illegal stock transactions while nine other senior
\nSK Group executives have been indicted for falsifying accounts to
\ninflate earnings at SK Global.<\/p>\n
The decision to liquidate SK Global was reached at a meeting
\nof creditors who earlier rejected an offer made by SK Group to
\ncontribute some US$416 million to a rescue package for the
\ncompany.<\/p>\n
\"Creditors decided to put SK Global under court receivership
\nfor liquidation,\" a Hana Bank spokesman told AFP.<\/p>\n
The decision came hours after Finance and Economy Minister Kim
\nJin-Pyo said the government would not intervene in the issue of
\nSK Global.<\/p>\n
\"Any intervention by the government would only hurt
\ninternational confidence (in South Korea) and cause moral hazard
\n(among business firms in financial difficulties),\" Kim said.<\/p>\n
\"It will be totally up to creditors (to decide on the fate of
\nSK Global),\" he said.<\/p>\n
Creditors hold SK Corp. partly responsible for SK Global's
\nproblems, including its fraudulent bookkeeping.<\/p>\n
SK Global owes a total of 1.5 trillion won ($1.25 billion)
\nworth of debt obligations in the form of bills receivable to SK
\nCorp., the flagship of the country's third largest chaebol or
\nconglomerate.<\/p>\n
The creditors had demanded that SK Corp. swap some one
\ntrillion won out of the 1.5 trillion won into equity but it would
\nonly agree to do so for 450 billion won of the domestic bills and
\nanother 450 billion won in overseas bills receivable.<\/p>\n
SK Corp. expressed shock and dismay at the decision. \"We hope
\nthe creditors reconsider this decision,\" a spokesman of SK Corp.
\nsaid. \"We will continue our efforts to persuade creditors,\" he
\nsaid.<\/p>\n
SK Corp. said it would be difficult to meet the creditors'
\ndemands because of opposition from its shareholders, including
\nthe biggest shareholder, Monaco-based investment fund Sovereign
\nAsset Management.<\/p>\n
Since purchasing a controlling 14.99 percent stake in SK Corp.
\nin late April, Sovereign has demanded that the firm should keep
\nits distance from scandal-hit SK Global.<\/p>\n
Analysts said SK Global's liquidation would lead to the
\ndissolution of SK Group which has 59 units in its empire.<\/p>\n
Creditors said they would sell all the shares of the group
\nchairman which they hold as collateral for their loans to SK
\nGroup when SK Global is liquidated in a few month's time.<\/p>\n
\"In this case, the links between SK units would become loose
\nand each unit would stop assisting each other and look beyond the
\ngroup for anyone who would offer higher prices for their
\nproducts,\" said analyst Sung Byung-Soo of Kyobo Securities Co.<\/p>\n
SK Global has been in a deepening liquidity crisis since it
\nadmitted earlier this year to inflating earnings by more than
\n$1.2 billion in 2001 to hide losses.<\/p>\n
On March 17, creditors placed SK Global under a joint bank
\nreceivership, freezing the ailing firm's debt repayments for
\nthree months until June 18 to help it dig itself out of the
\nscandal.<\/p>\n
Creditors said they had become skeptical about SK Group's
\nsincerity in its efforts to rescue SK Global, accusing it of
\nhiding overseas debts and withholding its hidden assets from the
\ncreditors even after the bank receivership began.<\/p>\n
At the end of 2002, SK Global had a negative balance sheet of
\n4.38 trillion won with its total debt standing at 9.97 trillion
\nwon against total assets of 5.59 trillion.<\/p>",
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