Hyundai Construction to be placed under court receivership if it fails to present new self-rescue plan

Creditors of Hyundai Engineering & Construction (HEC) have decided to place the company under court receivership if it fails to present a new self-rescue plan including contributions from the private wealth of Hyundai Group founder Chung Ju-Young and his son. The fate of HEC will be finally determined at a creditor consultative meeting held Thursday and Friday.

They also decided to implement powerful restructuring measures such as the injection of public funds into Hyundai Investment and Trust, which is having difficulty in attracting foreign capital, if the company fails to secure the amount of capital it promised by the year-end.

In a preparation for the worst-case scenario of HEC being placed under court receivership, the creditors also set up a contingency plan including measures to stabilize capital markets and offer financial assistance to subcontractors.

A high-ranking official of the Financial Supervisory Service said Wednesday that creditors, including Korea Exchange Bank, are calling for a self-aid plan to reduce HEC¡¯s debts by 1 trillion won through the donation of some of the private wealth of Chung Ju-Young and his son Mong-Hun, chairman of Hyundai Asan. They are asking Chung to donate his 3 percent stake in Hyundai Motor and Mong-Hun to give up his stock holdings in Hyundai Heavy Industries. If HEC fails to present a new self-rescue plan, the creditors will fix the plan to place HEC under court receivership at a creditor consultative meeting Friday.

But the official said that unlike other cases of liquidating insolvent companies, court receivership for HEC will be a strategic action to revive the company. Creditors will first put HEC under court receivership and then divest its managerial control through a capital reduction and a debt-for-equity swap before releasing the company from court protection when the liquidity problem is solved, he said.

A debt-for-equity swap for HEC, serving as a holding company for Hyundai Group, is a very powerful action that virtually means removing the group¡¯s equities in the building company. Meanwhile, Korea Exchange Bank made it clear Wednesday that it will not provide additional funds to HEC even if it offers a ranch in Sosan as collateral.