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Daewoo talks on hold
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August 27, 1999: 10:56 a.m. ET
Creditors still reviewing restructuring plans, demanding asset protection
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NEW YORK (CNNfn) - Overseas creditors of South Korea's Daewoo Group delayed a formal meeting with the ailing automaker Friday to continue reviewing the debt workout scheme imposed on key Daewoo firms the previous day.
Meanwhile, a senior bank executive close to the negotiations told the Wall Street Journal the overseas creditor banks won't cooperate with any restructuring plan that doesn't include adequate asset protection from the company.
Daewoo's 69 overseas creditor banks held informal discussions with government and Daewoo officials Friday over the impact the restructuring plan would have on the group's future. A more formal meeting is expected to take place soon, a Daewoo Group spokesman said.
"The fresh date for the meeting has not yet been set, but I don't think it will take a long time," the spokesman of the group's restructuring team said.
Daewoo, South Korea's second-largest conglomerate, currently owes overseas creditors roughly $5.1 billion. It was rescued from bankruptcy only when the consortium of banks allowed the company to restructure its debt.
Daewoo officials said earlier Friday a planned meeting with an eight-member steering committee representing its overseas creditors was delayed at the request of creditors, whom Daewoo said wanted to have time to review the debt workout scheme announced Thursday.
Domestic creditors Thursday put 12 key Daewoo companies, including automaker Daewoo Motor Co. and shipbuilder Daewoo Heavy Industries Co., under a debt workout program.
Debt repayment by these companies was immediately frozen for three months during which creditors and the companies would draw up detailed revival plans. In exchange, the domestic creditors agreed to extend an additional $700 million in trade financing to keep the Daewoo firms and their subcontractors afloat while negotiations continued.
The country' financial regulator said Thursday any of the companies put under the workout scheme could end up seeking court receivership if a lack of cooperation from foreign creditors led to a severe liquidity crunch at the companies.
But overseas creditors apparently aren't willing to proceed further unless some sort of asset protection is extended by the company, the Journal reported.
"Foreign banks are not monolithic; they won't be controlled in the same way that the [government's Financial Supervisory Commission] has control over local banks," a senior banker told the Journal.
In a related development, Standard & Poor's Friday lowered its corporate credit rating on Daewoo Corp., Daewoo's overseas trading and construction arm, to double-'C' from triple-'C', citing the decision to put the company under the workout program.
"The unprecedented scale and complexity of reorganizing a Korean conglomerate the size of the Daewoo Group make the outcome of any restructuring program highly uncertain," S&P said in a prepared statement. 
-- from staff and wire reports
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Daewoo
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