Park Chan-Kyong

Park Chan-Kyong
Agence France-Presse
Seoul

Creditors have decided to put SK Global, the ailing trading
arm of South Korean conglomerate SK Group, under court
receivership for liquidation, a spokesman for top creditor Hana
Bank said Wednesday.

The liquidation of SK Global, whose fraudulent bookkeeping
triggered a liquidity crisis in March, could lead to the break up
of the country's third largest business group, analysts said.

SK Group's patriarch, Chey Tae-Won, has been in prison since
February for illegal stock transactions while nine other senior
SK Group executives have been indicted for falsifying accounts to
inflate earnings at SK Global.

The decision to liquidate SK Global was reached at a meeting
of creditors who earlier rejected an offer made by SK Group to
contribute some US$416 million to a rescue package for the
company.

"Creditors decided to put SK Global under court receivership
for liquidation," a Hana Bank spokesman told AFP.

The decision came hours after Finance and Economy Minister Kim
Jin-Pyo said the government would not intervene in the issue of
SK Global.

"Any intervention by the government would only hurt
international confidence (in South Korea) and cause moral hazard
(among business firms in financial difficulties)," Kim said.

"It will be totally up to creditors (to decide on the fate of
SK Global)," he said.

Creditors hold SK Corp. partly responsible for SK Global's
problems, including its fraudulent bookkeeping.

SK Global owes a total of 1.5 trillion won ($1.25 billion)
worth of debt obligations in the form of bills receivable to SK
Corp., the flagship of the country's third largest chaebol or
conglomerate.

The creditors had demanded that SK Corp. swap some one
trillion won out of the 1.5 trillion won into equity but it would
only agree to do so for 450 billion won of the domestic bills and
another 450 billion won in overseas bills receivable.

SK Corp. expressed shock and dismay at the decision. "We hope
the creditors reconsider this decision," a spokesman of SK Corp.
said. "We will continue our efforts to persuade creditors," he
said.

SK Corp. said it would be difficult to meet the creditors'
demands because of opposition from its shareholders, including
the biggest shareholder, Monaco-based investment fund Sovereign
Asset Management.

Since purchasing a controlling 14.99 percent stake in SK Corp.
in late April, Sovereign has demanded that the firm should keep
its distance from scandal-hit SK Global.

Analysts said SK Global's liquidation would lead to the
dissolution of SK Group which has 59 units in its empire.

Creditors said they would sell all the shares of the group
chairman which they hold as collateral for their loans to SK
Group when SK Global is liquidated in a few month's time.

"In this case, the links between SK units would become loose
and each unit would stop assisting each other and look beyond the
group for anyone who would offer higher prices for their
products," said analyst Sung Byung-Soo of Kyobo Securities Co.

SK Global has been in a deepening liquidity crisis since it
admitted earlier this year to inflating earnings by more than
$1.2 billion in 2001 to hide losses.

On March 17, creditors placed SK Global under a joint bank
receivership, freezing the ailing firm's debt repayments for
three months until June 18 to help it dig itself out of the
scandal.

Creditors said they had become skeptical about SK Group's
sincerity in its efforts to rescue SK Global, accusing it of
hiding overseas debts and withholding its hidden assets from the
creditors even after the bank receivership began.

At the end of 2002, SK Global had a negative balance sheet of
4.38 trillion won with its total debt standing at 9.97 trillion
won against total assets of 5.59 trillion.