U.S. investors buy Hyundai units

U.S. investors buy Hyundai units

SEOUL (AP): The South Korean government signed a much-awaited
preliminary deal with a U.S. consortium Thursday to jointly take
over three heavily indebted financial arms of the Hyundai group.

The two trillion won (US$1.55 billion) deal, struck after a
year of bargaining, removed a major headache for South Korea,
which has been trying to reform its debt-ridden financial and
corporate sector since the 1997-98 Asian economic crisis.

The deal calls for the U.S. investment firm American
International Group and New York merchant bank W.L. Ross to
invest 1.1 trillion won ($850 million) for controlling stakes in
Hyundai Securities Co., Hyundai Investment Trust & Securities Co.
and Hyundai Investment Trust Management Co.

But as a way to split risks, the deal requires the Seoul
government to pump 900 billion won ($700 million) into the
Hyundai affiliates.

The government's Financial Supervisory Service said some minor
details have yet to be worked out. A final agreement is set to be
signed by October and the promised investment will be completed
by October, it said.

The deal drew mixed reaction.

"The government's involvement in the deal is definitely
against the market principles, but it was an inevitable choice
because AIG requested it," said Suh Young-soo, an analyst at Good
Morning Securities.

The focus of the negotiations was a request by the American
firms that the Seoul government take part in the deal as an
investor in an attempt to spread risk.

The Seoul government reluctantly accepted the U.S. firms'
request, hoping that the deal will help boost the investor
confidence in an economy that recovered from the impact of the
1997-98 Asian financial crisis but is now in deep recession.

Government officials also reported progress in efforts to
rescue another heavily indebted firm, Hynix Semiconductor Inc.,
formerly Hyundai Electronic Industries.

Bailed out twice by government-controlled creditor banks in
the past year, the world's third-largest computer memory chip
maker is in deep trouble with an estimated debt of $5 billion
amid plummeting chip prices.

Creditors reportedly plan to help the firm get back on its
feet through a debt-for-equity swap arrangement. The deal, if
made, will drastically lessen the company's financial burden.

The rescue, if realized, is certain to draw sharp protests
from the United States and other countries. Washington protested
previous rescues, contending that they were against the rules of
the World Trade Organization.

The state-run Korean Development Bank purchased $2 billion
worth of maturing Hynix bonds earlier this year. Last year,
creditor banks provided Hynix with $2.4 billion in emergency
loans.