Daewoo, FIs reach debt restructuring agreement

Daewoo, FIs reach debt restructuring agreement
REUTERS

SEOUL, Jan 22: South Korea said on Saturday that leading foreign creditors had reached a debt restructuring agreement with troubled Daewoo group, once one of the country's mightiest conglomerates.

The plan to purchase loans for cash would apply to $4.84 billion in non-secured loans to four Daewoo affiliates out of Daewoo's total foreign debts of $6.7 billion, South Korea's Corporate Restructuring Coordination Committee (CRCC) said.

"If all debt is tendered, the purchase price on an overall basis will be the equivalent of between 39 per cent and 40 per cent of face value," the CRCC said. Advisers representing Daewoo group's local creditors had sought agreements to buy debts from foreign creditors exposed to Daewoo Corp, Daewoo Electronics, Daewoo Motor and Daewoo Heavy IndustriesThe heavily-indebted Daewoo group and a steering committee composed of nine foreign representative banks reached the deal in Hong Kong in the early hours of Saturday morning.

The steering committee offered last week to accept a collection rate of around 45 per cent on Daewoo's foreign debt. Daewoo had earlier offered a 36.5 per cent of collection rate.

Analysts and officials said the plan would give South Korea's financial markets a major boost of confidence and could help bring down interest rates. "If this development didn't take place, it would be negative (for Korea)", said Oh Ho Keun, chairman of the CRCC.

The deal "would probably give a psychological boost to the financial markets and confidence will be restored to a substantial extent. It will probably stabilise the capital markets as well. It's generally a positive development."

The CRCC said the plan would be forwarded to Daewoo's approximately 200 foreign creditors by mid-February and they would be required to respond by mid-March.