HEC unveils new self-relief plan

Hyundai Engineering and Construction has unveiled a supplemental self-relief plan stating that it will raise 581 billion won. Kim Kyung-Lim, president of Korea Exchange Bank, Hyundai's main creditor bank, said that the plan is likely to be realized and that Hyundai would be able to overcome its liquidity problem if the existing loans are rolled over at maturity.

The plan includes introducing foreign-currency loans by offering former honorary chairman Chung Ju-Yung's stake in Hyundai Motor as collateral and Hyundai Asan Chairman Chung Mong-Hun's participation in a capital increase, which will be determined later.

All 139 director-level executives at Hyundai submitted their resignations. The company is reportedly intending to lay off 20% to 30% of its executives as part of its restructuring plan. Creditors said that Hyundai would sell off its shares in Hyundai Heavy Industries and Hyundai Oil, issue 80 billion won in convertible bonds, introduce 165 billion won by offering Chung Ju-Yung's Hyundai Motor stocks as collateral, sell the company's ownership in Hyundai Asan and collect outstanding payments from Iraq and other overseas construction projects.

By doing so, Hyundai will raise a total of 581 billion won, the creditors said.

To reduce its debt, former honorary chairman Chung is considering whether to invest his 170 billion won in Hyundai's corporate bonds into capital investment in Hyundai. In the second self-relief plan, Hyundai intends to raise 1.51 trillion won by the year's end to slash its debt to the 4 trillion won level.

With worsening market conditions, Hyundai has raised only 539.7 billion won by the end of September. And the amount of money that it will raise from October through December also was adjusted to 522.3 billion won from the original plan of 982.4 billion won. So Hyundai was on course to a shortage of 416.7 billion won. With the additional self-relief plan, however, the company will have about 164.3 billion won in surplus fund.

Kim said that the new plan is focused on a realistic approach. He noted that Hyundai will sell the stocks mentioned at the market price, although their prices dropped substantially.