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GM bids for Daewoo arm
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December 14, 1999: 8:43 a.m. ET
Rivals line up for auto unit of troubled Korean group; creditors reject workout plan
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LONDON (CNNfn) - General Motors launched a preliminary bid for Daewoo Motor Tuesday, though a deal could be derailed by the deadlocked talks between the South Korean group’s parent and its international creditors
A GM spokesman said the proposal offered a price in the billions of dollars. But he did not elaborate. GM’s proposal reportedly does not include the assumption of any Daewoo debt.
The sale of Korea’s second-largest auto manufacturer has been presented as part of package of measures to bail out the Daewoo Group conglomerate, which came close to collapse in July under the weight of $76 billion in debt.
General Motors (GM) first expressed its interest in August when it signed a strategic partnership with Daewoo Motor, but rivals including Ford (F) and Italy’s Fiat are also believed to be eyeing the automaker, which has debts of $16.4 billion.
GM boosted its Asian presence last week by paying $1.4 billion for a 20 percent stake in Fuji Heavy Industries, parent of Subaru Motor.
Korea Development Bank, Daewoo’s largest creditor, is believed to favor an auction of the auto unit as part of a broad asset divestment program to clear the conglomerate’s debts.
However, Daewoo Group and its international creditors remain split over the restructuring of the troubled South Korean conglomerate, sources close to the negotiations said Tuesday.
The parent company faces collapse unless it can renegotiate its $6.7 billion in international debt. Its offer to buy out the obligations for as low as 18 cents on the dollar was roundly rejected by creditors’ representatives.
Overseas banks are demanding a loan recovery ratio of 75 to 80 percent, but sources close to Daewoo suggested there was limited room for compromise. "We're not about to put forward another proposal in light of that (rejection)," the source said. "The figures could be adjusted a bit, but they won't change as dramatically as foreign creditors would like."
In the rejected debt workout plan, recovery ratios for the $3.99 billion in unsecured debt owed by Daewoo's overseas subsidiaries ranged from 30 percent to 90 percent.
Under the current proposal, Daewoo would repay 18 cents on the dollar on unsecured debt owed at the parent level by Daewoo Corp., 33 percent of the unsecured obligations by the Daewoo Motor parent, 34 percent for Daewoo Electronics and 65 percent for Daewoo Heavy Industries.
Daewoo's overseas creditor steering committee immediately rejected the proposal, raising the possibility that Daewoo would have to hold separate talks with scores of international banks, some of which have already begun legal action to recover their loans.
That could vastly complicate the workout plans for the various affiliates of Daewoo Group, once Korea's second largest conglomerate but now being dismantled after barely averting default on its overall debts in July. 
-- from staff and wire reports.
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Daewoo
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