Creditors To Eat $12 Billion in Daewoo Debt

SEOUL, Sept 18 Reuters reported that creditors of bankrupt Daewoo Motor plan to write off 77 percent of the South Korean carmaker's 19 trillion won ($15.72 billion) in debt, paving the way for General Motors to launch its joint venture to take over Daewoo.

After a period of protracted negotiations, General Motors agreed in April to lead a joint venture, together with Japan's Suzuki Motor Corp to revive South Korea's third-largest carmaker as GM Daewoo Auto & Technology Co, which is expected to launch in October.

A Daewoo spokesman told Reuters on Wednesday the writeoff plan was part of a debt rescheduling scheme, which was previously submitted to a provincial court and is due to be finalised by the end of September.

"Under the plan, creditors will convert 14.56 trillion won of loans into stocks of Daewoo Motor," said spokesman Kim Sung-soo. "Then the equity will be cancelled with Daewoo Motor's liquidation."

Daewoo's creditors include state-run Korea Development Bank, Korea Asset Management Corp and most of the country's major banks.

Daewoo will initially be split into five separate units, including the GM joint venture, Pupyong unit, Pusan bus unit, Kunsan truck unit and Daewoo Motor, Kim said.

"The new companies from Daewoo Motor will repay the remaining 4.44 trillion won over a period of up to nine years," he said.

GM will take a 42.1-percent stake in the venture, Suzuki 14.9 percent while GM partner firm will take 10 percent in the venture and Daewoo lenders will hold the remaining 33 percent.

RUMBLINGS FROM PARTS SUPPLIERS

Analysts said the debt reorganisation plan would be accepted by parties involved despite rumblings from some parts suppliers.

"A delay in the launch of the joint venture at this stage will not help anyone," said Han Sang-kyun, analyst at Samsung Securities.

Shares in listed unit Daewoo Motor Sales Co rose 70 won to 9,330 by 0247 GMT, outperforming a 2.91-percent tumble in the main index (KSE:^KS11 - News).

Some 190 parts supplies began a boycott late in August that paralysed Daewoo Motor for two weeks, demanding a full repayment of $700 million in unpaid bills.

The creditors, which have spent $2 billion to keep Daewoo afloat since 1999, are calling for the parts makers to halve their claims.

Widening losses pushed Daewoo's largest supplier Korea Delphi Automotive Systems and other suppliers to opt to resume supplying parts to Daewoo Motor.

"Creditors take up the biggest chunk of Daewoo's losses. Parts vendors know they need to shoulder some of the burden," said Song Sang-hoon, analyst at Dongwon Securities.

Daewoo Motor entered court receivership in November 2000 after building up mountains of debts under an ambitious global expansion programme