Creditor banks and the South Korean government on Thursday issued a fresh warning that the Hyundai Group's civil engineering flagship would be declared bankrupt if it failed to raise fresh capital.
"If Hyundai Engineering and Construction (HEC)'s self-rescue plan turns out to be inadequate, it would be placed under court receivership," Finance and Economy Minister Jin Nyum told journalists.
He dismissed reports the government would have to keep the country's largest construction company alive because of the potential fall-out from any bankruptcy.
"The government stands firm in its position that the Hyundai case should be handled in accordance with market principle," Jin said.
His comments were echoed by Kim Kyung-Lim, head of the Hyundai Group's main creditor, Korea Exchange Bank.
"Hyundai must come out with a self-rescue plan which could win market confidence. Otherwise, something tragic could occur," he told journalists.
Hyundai is locked in a tough battle with government officials over how much personal wealth the group's founding family should inject into the company to avoid bankrupcy, Hyundai officials said.
HEC, the world's 17th biggest civil engineering firm, promised to raise more than 700 billion won ($619 million) in fresh capital to ride out its credit crisis, an HEC spokesman said.
"The donation of private wealth from major shareholders highlights our rescue plan," he told AFP, adding group founder Chung Ju-Yung and his son, Chung Mong-Hun, would sell their holdings in Hyundai units.
"But there have been disputes, with financial officials demanding bigger donations from the Chung family," he said.
The plan, if approved, will be disclosed on Friday, a deadline set by creditor banks.
HEC gave no details but the national Yonhap news agency said Chung Ju-Yung would sell a 2.69-percent stake in Hyundai Motor Co. and his Sosan farm while his son plans to sell a 1.7-percent stake in Hyundai Electronics Industries Co. and other holdings.
HEC has been pressured to present a wholesale restructuring plan since it narrowly avoided bankruptcy Tuesday by making last minute debt repayments of 22.4 billion won ($19.6 million).
Anxiety is now focussed on three trillion won of debts due by the end of December.
Demands from the government and creditors have grown as the country braces for more big-name corporate bankruptcies this week. A list of South Korean firms with irrecoverable debts will be released on Friday.
With HEC, bank officials have acknowledged something of a dilemma: the firm has thousands of subcontractors at home and is engaged in massive construction projects in Asia and the Middle East as well as an international project to build nuclear reactors in North Korea, and bankrupcty would have multiple knock-on effects.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)