Foreign creditors of Daewoo Group have been given an extra three weeks to sell $4.3 billion of Daewoo debt to the chaebol's Korean creditors under the terms of an agreed buyout programme. The extension was granted at the foreign creditors' request during roadshows in London, Hong Kong and Singapore, owing to technical difficulties in meeting an original deadline of 30 June, says Park Young Ha, a managing director at Daewoo's restructuring committee.
Foreign creditors accepting the programme will receive 40% of the face value of their debts plus warrants, which could give them stakes of as much as 8% in Daewoo Corp, Daewoo Electronics and Daewoo Heavy Industries in the future. The cash portion of the settlement will be paid out in the five weeks after the 21 July deadline, during which representatives of the two parties will attempt to reconcile claims with the group's liabilities. "The reconciliation process will be done by accounting firms acting for Daewoo, the foreign creditors' steering committee and a third-party accountant," says Hong-Sung Moon, deputy director at South Korea's Ministry of Finance and Economy.
The debt eligible for the buyout programme represents the vast bulk of Daewoo Group's unsecured borrowings with foreign creditors. The group's total foreign debt (as of August 1999) was $5.5 billion and a further $46.8 billion was owed to Korean creditors, of which $38.1 billion was unsecured, says Park.
Once the foreign creditors' unsecured borrowings have been acquired by Daewoo's Korean creditors, it will be sold on to Korea Asset Management Corp (KAMCO), a state-owned entity. The Korean creditors holding unsecured debts, including KAMCO, will then reach a deal with Daewoo Group and this will include a debt-for-equity swap.
Certain Daewoo assets are in the process of being sold. Last week, Ford Motor was named sole preferred bidder to buy acquire Daewoo Motor for W7.7 trillion ($6.9 billion). Ford outbid two consortia ûDaimlerChrysler/Hyundai Motors and General Motors/Fiat û to become the preferred bidder for Korea's second biggest auto maker.