'Hyundai's insufficient self-rescue plan to invite court receivership'

The government and the creditor banks of Hyundai Engineering and Construction (HEC) sent notice of their final decision to the Hyundai Group, advising it to take an active lead in formulating a workable self-rescue program in order to avoid the worst-case scenario of court receivership. However, as Hyundai Group has not been eager to formulate such a self-rescue plan, the possibility of court receivership remains high.

The government and the creditor banks stressed that HEC's failure to meet its obligation for the returning bank notes issued by the company will necessitate bankruptcy proceedings by the court. However, it has been revealed that with the presentation of a workable self-rescue plan agreed on by the major shareholders, the normalization of management would be possible through capital reduction and debt-to-equity swaps. The decision was reached at a meeting with the creditor banks called by the Chairman of the Financial Supervisory Commission (FSC), Lee Keun-Young. Lee explained that the bankruptcy proceedings may have detrimental side-effects internationally in the light of various HEC construction projects abroad as well as a domino effect on the supporting industry. As such, the government and the creditors would be open to capital reduction and debt-to-equity swaps should the major shareholders agree to the self-rescue plan.

Chairman Lee added that a self-rescue plan that relies on the sell-off of HEC properties or stocks no longer has any clout in the market. He further advised that rather than leave the self-rescue plan in the hands of HEC, the Hyundai Group must now take charge and formulate one.

The chairman¡¯s suggestion is seen as the last and final warning to Hyundai to take the lead in the matter or face bankruptcy proceedings by the court. In connection with the final notice, the president of Korean Exchange Bank, Kim Kyung-Lim, stated that early this week an agreement on capital reduction and investment conversion with the chairman of the Hyundai Group, Chung Mong-Hun, would be sought in addition to the submission of a self-rescue plan by the entire company. Meanwhile, Hyundai Group Chairman Chung met with the president of HEC and other officials at the company headquarters in Kye-dong. Seoul, but they were not able to come up with any tangible plan.

Chairman Chung returned to Korea on Nov. 2 and requested help from distant relatives, including advisor to Hyundai Heavy Industry Chung Mong-Joon and Chung Se-Yung, honorary chairman of Hyundai Industrial Development & Construction. However, he has not yet had any contact with Chung Mong-Koo, Chairman of Hyundai Motor, who went to China on Saturday. It has been revealed that as an emergency measure, the Hyundai Group is considering the possibility of Chairman Chung Mong-Hun's Hyundai Merchant Marine and Hyundai Corporation buying up the stocks of Hyundai Asan and other non-listed stocks held by HEC. Hyundai has set Nov. 7 or the 8 as the date for the self-rescue plan.