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."