Gov't considers depriving HEC of management right

The government and creditors, which claimed for court receivership of Hyundai Engineering & Construction, have expressed their intention to deprive HEC of right for management through reduction of capital.

It was analyzed that they must have realized putting HEC under court receivership would have a great impact on the nation's economy as a whole. It means that the government tries to separate HEC from the hands of chairman Chung Mong-Hun and the current management and seek normalization of the company through management by creditor banks. Industry executives pointed out that HEC may not be able to win overseas construction orders if the company goes bankrupt and is placed under court receivership.

Up until now, Hyundai Group expressed that it has no intention to submit an agreement to shift of bank loans to equity investment in HEC, saying that it cannot expect investment by large shareholders as well as by Hyundai Group at a time when they could lose the right of management at any time under the projected consent. Also, company executives must have calculated that they could sustain for about a month if bank loans are rolled over through the year-end.

The will of creditors is also unclear. Kim Kyung-Lim, president of Korea Exchange Bank, said that creditors will ask a consent on shift of loans into equity investment based on the agreement made at recent creditors' meeting. But, sources at the creditors' group said that it would be unnecessary as it will be realized naturally if HEC is placed under court receivership.

Analysts say that the intention of the government is something else. It is believed that the government is using two different cards of submitting a consent for shift of loans into equity investment and court receivership in order to attract financial aid to HEC from the Chung's family and Hyundai Group.

The government and creditors know well that they could not expect anything special even if they take over the right of HEC's management or pursue its self-relief package. An official of Korea Exchange Bank said that what creditors expect in practical terms is financial aid from Hyundai's affiliates and the Chung's family.

Park Hyeon-Jin witness@donga.com