Dong-Ah Construction to be liquidated

Seoul Bank and other creditors have made a decision that will shut down Dong-Ah Construction Industrial Co. The creditors have declined to provide fresh loans to Dong-Ah and decided to suspend its workout program.

Dong-Ah's creditors held a meeting Monday to discuss the 340.9 billion won loan request by the company, but only 25.26% of participating creditors agreed to it. As a result, Dong-Ah cannot expect any financial aid from the financial institutions.

The Korean contractor is going to be the first insolvent company to be ousted from the market and it is expected spark the liquidation of other insolvent companies. Also, the future of Korea Express, which offered 700 billion won of payment guarantee to Dong-Ah Construction is unclear.

Officials of the creditors' group said that Dong-Ah's sales consist of 80% to 85% of domestic orders but that the domestic businesses are to slow down as a whole, noting that creditors judged that the company's normalization plan would be difficult to realize.

The creditors will hold a steering committee meeting soon and will ask 42 involved financial institutions if they will agree to the decision.

An official at Seoul Bank, the main creditor bank, said that the case is very likely to be approved by the creditors. Dong-Ah officials said that it has secured enough fund to sustain through mid-November, but it is expected that creditor banks would collect their credit from Dong-Ah at the same time.

"If Dong-Ah fails to secure its settlement fund, it will go bankrupt and apply for a court receivership," a creditor official said. "Korea Express also will face the same destiny if it fails to settle 700 billion won of payment guarantee it offered to Dong-Ah."

During the first five months of 1998, shortly before it enters into the workout program, Dong-Ah has received 1.01 trillion won of fresh loans from domestic financial institutions. And it has obtained 160 billion won in additional financing after its workout was confirmed. However, the company's sales during the first half of this year amounted to 797.4 billion won and its operating profit was limited to 6.7 billion won.