SKorea's Kia Group to get bail-out loans

SKorea's Kia Group to get bail-out loans

SEOUL (AFP): South Korean banks yesterday announced bail-out
loans to the troubled Kia Group under an anti-bankruptcy pact,
but the auto giant protested the move as unwarranted.

Kia's creditors said that 18 of the group's 38 subsidiaries,
including Kia Motors Corp., would benefit. Kia Motors is the
country's third largest auto company.

Kia, the country's eighth largest conglomerate, was the third
group to receive emergency loans under the anti-bankruptcy pact
signed by banks to prevent unnecessary insolvencies.

The pact, which ties the company to steps ordered by the
banks, followed a series of bankruptcies which began in January
when Hanbo, the country's 14th largest conglomerate, collapsed
under US$5.8 billion of debt.

"Since late May, banks have extended $89 million in emergency
loans to Kia, but we failed to solve its problems. So, our
decision was inevitable, " said Kwon Woo-Ha, a Korea First Bank
executive.

But Kia said the decision was "unilateral," vowing to try to
solve its problems independently without affecting operations
overseas, including two auto projects in Brazil and Indonesia.

"It was an unexpected decision. We neither asked nor wanted to
be selected as a beneficiary of the pact," Kia spokesman Roh So-
Ho said.

He ruled out Kia's possible insolvency. The group has offered
to sell real estate, but its financial woes persisted, aggravated
by rumors of the possible merger or acquisition of its auto
flagship.

Other conglomerates urged additional government steps to help
Kia, but government officials showed a lukewarm response.

"It is frustrating, but there is nothing more the government
can do. It is up to the individual companies to find their way
out," Finance and Economy Minister Kang Kyong-Shik said.

Trading in Kia's stock was suspended on the Korea Stock
Exchange and the central Bank of Korea (BOK) immediately released
1.12 billion dollars into the market in the form of repurchase
agreements to ease liquidity problems.

The decision to put Kia under bank protection pushed share
prices down 1.2 percent despite an unusual step by a fellow
conglomerate, the Hyundai Group, to buy $56 million of Kia's
bonds.

Creditor banks, led by Korea First Bank, said Kia was faced
with 314.6 million dollars worth of promissory notes rolling in
on Tuesday after failing to honor notes worth of $52.36 million
on Monday.

But under the bail-out program, banks are required to freeze
loan collection for two months from Tuesday, with Kia's 18
subsidiaries receiving overdraft loans, they said.

Creditor banks said they would work out follow-up measures by
July 30.

Despite the group's persistent financial woes, analysts said
Kia as a whole remained healthy, despite total debts of $10.8
billion, including $6.1 billion in bank loans.

The creditor banks agreed, in a press conference, that Kia has
a great potential for revival.

The group recorded 129.1 billion won in net losses on sales of
12.2 trillion won ($13.7 billion) in 1996. Kia, which has an
annual growth rate of 30 percent, set total 1997 sales at $21.3
billion, including $4.5 billion in exports.