Hyundai rescue plan gets thumbs-up from creditors

Hyundai rescue plan gets thumbs-up from creditors

SEOUL (Reuters): South Korea's cash-strapped Hyundai
Engineering and Construction got an initial thumbs-up from its
main creditor on Monday after announcing its sixth rescue plan of
the year.

After delaying the announcement from Friday, the country's
biggest builder said that Hyundai Group would raise 1.3 trillion
won ($1.14 billion) and speed up moves to spin off affiliates.

"The plans are considered comprehensive," Kim Kyung-lim,
president of main creditor Korea Exchange Bank told a news
conference after Hyundai's latest efforts were announced.

But analysts said it now remained to be seen if the plans
would be put into action after the company's repeated pledges to
raise funds and the builder's close brushes with bankruptcy.

Hyundai Engineering, struggling to work off almost a quarter
of its 5.1 trillion (corrects) won debts by year end, had won
debt rollovers from domestic creditors, but its banks had
demanded a fund-raising plan before they renewed fresh lending.

"Hyundai's reform plan itself is important but investors are
now focusing on how and when the conglomerate would implement the
new plan," said Lee Kye-joon, an analyst at Daishin Securities.

Finance Minister Jin Nyum said last week the government would
not let Hyundai Engineering, parent of Hyundai Group, collapse
because it would have too big an impact on the economy as the
dominant builder.

But he said if its own rescue efforts fail, it could face a
capital reduction and debt-for-equity swap with government-led
creditors.

Hyundai Engineering stock ended up 110 won to 2,240 in the
day's heaviest trade and in record volume for the stock at some
90.1 million shares.

The news failed to lift the stock market however, where the
benchmark KOSPI index ended down 2.51 percent to 537.40. The won
2 slid to an 11-month low, ending at 1,154.0 per dollar in heavy
trading.

Its latest fund-raising package includes raising 600 billion
won from selling farm land west of Seoul and stake sales.

It said the sale of shares in affiliate chipmaker Hyundai
Electronics and shipbuilder Hyundai Heavy Industries would speed
up already planned spin-offs of the firms, to mid-2001 and end-
2001, respectively.

The Hyundai Group ended 1999 as a $92 billion conglomerate but
has plans to form five separate conglomerates, one of which was
formed in September, built around Hyundai Motor

At the same time, it has seen cash crunches at financial units
and the construction firm that have shaken its share prices this
year and in May forced group chairman Chung Mong-hun from office.

Chung was back at the podium on Monday, pledging to take a
bigger role in the conglomerate his father built out of a humble
repair shop, and vowing new discipline to boost profitability.

"I will take more responsibility for the management of the
group as well as Hyundai Engineering," Chung told reporters,
reversing a May promise to allow professional managers to take
over the family business.

Chung said there would be job cuts at the country's biggest
builder and streamlining of management, while operations from
apartment building to its North Korea initiatives would
prioritize profitability.

"Chung Mong-hun expressed his firm intention to oversee
responsible management, which is highly valued (by creditors),"
KEB's Kim said.

"We have revised our business structure to stress
profitability, so we are going to reduce overseas apartment
building and SOC projects which impose a cash burden (on the
company)," Chung told reporters.

He also hinted at drawing in foreign investment, saying talks
with companies in Singapore and Europe would be "completed as
soon as possible so we can improve corporate credibility and our
company's competitiveness on the world stage."