Daewoo's foreign creditors agree to debt recovery

Daewoo's foreign creditors agree to debt recovery

SEOUL (AFP): South Korean authorities and foreign creditors
clinched a deal Saturday on the recovery of debts from the failed
Daewoo Group after months of exhausting negotiations, an official
said.

Oh Ho-keun, head of the Corporate Restructuring Coordination
Committee (CRCC), said the two sides agreed the foreign creditors
would retrieve some 39 percent of their loans to Daewoo Corp. and
three major Daewoo units.

"We have reached a tentative agreement with them, under which
we will buy some US$4.9 billion of their unguaranteed loans at a
rate of a little bit more than 39 percent," Oh said on Seoul's
YTN television from Hong Kong.

The payment, amounting to about $1.9 billion, would be made in
cash, he said.

"This is a tentative agreement struck with the steering
committee. We have to persuade other foreign creditors to take
part in the debt buyout program," Oh said.

He said it marked a "watershed" in settling the debt crisis
that engulfed Daewoo, once touted as the country's second largest
conglomerate and a powerhouse of the Asian economic "miracle" of
the early 1990s.

Daewoo, one of the most high-profile victims of Asia's 1997
economic crisis, collapsed last August under around $77 billion
in debts run up through years of uncontrolled borrowing and
rampant expansion.

The CRCC said foreign creditors would be able to collect 32.3
percent of their loans -- totaling almost $6.6 billion -- to
Daewoo Corp., the group's flagship and trading arm.

The foreign borrowings by the numerous overseas branches of
the three units would be classified into eight groups and would
be repaid at ratios of between 31.5 percent and 95 percent.

South Korean creditor banks would jointly set up a corporation
to buy Daewoo Group's foreign debt. In turn, the state-financed
Korea Asset Management Corp. was likely to buy the foreign debt
"at a market price," the CRCC said.

Under the agreement, South Korean creditors would present by
mid-February details of debt rescheduling plans to foreign
creditors, who will decide by mid-March whether they are
acceptable.

The agreement sealed in Hong Kong after two days of meetings
is the culmination of about five months of often tense
negotiations in which the foreign creditors claimed they were
being unfairly treated.

In response, the government threatened to force Daewoo Corp.
into receivership unless a deal was struck swiftly.

Oh stressed the agreement helped cement the principle of equal
treatment of all creditors, foreign and Korean, under which they
had to bear some financial pain for their wrong lending
decisions.

The Daewoo Group has $6.57 billion of foreign debt, including
non-guaranteed debt of $4.84 billion, $1.3 billion of guaranteed
debt and $430 million of other liabilities owed by its overseas
branches.