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.