SEOUL, Nov 4: New Core Group, South Korea's 25th largest conglomerate, said on Tuesday that half of its 18 affiliates had filed for court protection, and analysts said more corporate failures would follow.

New Core was the seventh major South Korean business group this year forced to seek court protection or go into receivership under the weight of massive debts.

``The group needs to reschedule its debt payments and, at the same time, execute a strong restructuring plan,'' said executive managing director of the group, Jang Kwang-jun.

New Core's financial strains stem from an expansion of its distribution business and a financing bottleneck created by a slew of corporate failures this year, group officials said.

``Some conglomerates, especially those whose debt-to-equity ratio exceeds 500 per cent, will soon give up as business conditions have yet to improve,'' said an economist at the state-funded Korea Development Institute (KDI), Kim Joon-Kyong.

About 40 per cent of the nation's 50 largest groups have a debt-to-equity ratio of more than 500 per cent, according to government figures.

Conglomerates in that category include seventh-ranked Hanjin Group, 12th-ranked Halla Group and 14th-ranked Doosan Group, government figures show.

``Instability in financial markets is dragging down the recovery of the overall economy. In the process, more companies will go bust,'' said an economist at Samsung Economic Research Institute, Kwon Soon-woo.

Jang of New Core said the group would negotiate with its creditors to reschedule its loan payments.

The group plans to slim down by selling or merging affiliates so that just six companies remain, and by selling off about 500 billion won ($517 million) in real estate.

``We expect to cut our annual costs by about 173.5 billion won through restructuring,'' Jang said. ``We will become profitable again in six to seven years if creditors agree to soften the terms on their loans.''But creditors said they had yet to decide whether to endorse New Core's court protection plan.

``We are thinking. But New Core's move looks somewhat disappointing because the group said it could manage to survive if it was given fresh loans,'' said a spokesman of the Korea First Bank, Kang Won-kyong, New Core's main creditor.

Creditor banks provided 54.5 billion won in October to keep the staggering group afloat, but in the end New Core said that sum was not enough to keep the group from seeking court protection.

Special court protection allows companies to reschedule debt while keeping their current managers. Under the more common court receivership option, new managers are appointed, sometimes paving the way for a third-party takeover.``Managers or owners of failing companies should take responsibility. But now they seem to be abusing the system of court protection by trying to cling to their managerial rights,'' said Kim of KDI.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.