Taeil and Newmax brush with bankcruptcy

Taeil and Newmax brush with bankcruptcy

SEOUL (AFP): South Korea's largest computer parts maker, Taeil Media Co. Ltd., and its subsidiary, Newmax Co. Ltd., brushed with bankruptcy yesterday before being granted a grace period for debt repayment, banks said.

The two companies were placed under a protection agreement among creditors to give them breathing space and more time to seek ways out of their current cash flow problems, said their main creditor, Cho Hung Bank.

"Taeil was put under the pact as it faced cash flow problems after making excessive investment in non-manufacturing areas, and after a sudden collection of loans by non-banking institutions," Cho Hung official Lee Yong-Gun said.

Taeil, which also produces computer parts in China, had been at the center of rumors about a possible connection with President Kim Young-Sam's son, who was jailed for three years this week on tax evasion and influence-peddling charges.

Taeil's owner, Chung Kang-Hwan, was investigated by prosecutors in May, when the son was jailed for stashing away illegal money from businessmen in return for favors.

Chung, who opened a small computer parts plant 14 years ago, has dramatically expanded the scope of his business since the president took office in 1993. He faced cash-flow troubles earlier this year after his failed attempt to buy a merchant bank.

The outstanding debts owed by Taeil and its eight subsidiaries total US$1.1 billion, bank officials said. Taeil's total sales last year was estimated at $1.1 billion.

Share prices nosedived 2.6 percent on the Korea Stock Exchange Wednesday sending the composite index to a five-year-low on jitters over the near insolvency of Taeil and the underwear and resort major, Ssangbangwool group.