Daewoo Motor defaults on debt payment Monday

Daewoo Motor failed to pay debts that maturing Monday. Park Sang-Bae, a director of the Korea Development Bank (KDB), the main creditor of Daewoo Motor, said that the automaker was required to honor promissory notes worth 45 billion won demanded by Seoul and Korea First Bank, but failed to do so. He said that if the company does not make the payments by Tuesday, it will officially be declared bankrupt.

Director Park also said that creditors will not grant additional funds unless the labor union of Daewoo Motor submits a written agreement to restructure. He officially announced that the creditors have already embarked on preparations to place the company under court receivership.

Daewoo Motor is required to meet payments to creditors worth 170 billion by the end of this week.

Specifically it has to pay 45 billion won by Monday, 42 billion won by Tuesday and 33 billion won by Wednesday. If the labor union refuses to agree to the restructuring plans, it seems inevitable that the company will be put under court receivership.

However, the KDB said that it would summon a general meeting of creditors and discuss injecting new loans to the company as soon as the union submits the written agreement.

Choi Il-Jong, head of a team in charge of Daewoo affiliates in the bank, said that creditors see few chances for a Daewoo Motor revival with the current inefficient manpower structure, so without the union¡¯s agreement on restructuring, discussions on fresh loans will be impossible.

The bank plans to call a creditors¡¯ meeting and resolve the suspension of a workout program if Daewoo Motor finally goes bankrupt due to the absence of the agreement. The bank has already started collecting data in case Daewoo files for court receivership.

Presently, the total debts of Daewoo Motor total 17 trillion won. Of them, about 5 trillion won are owed to the banking sector and 6 trillion won to the non-banking sector. Besides, the financial institutions are offering 150 billion won each month to the company for operation costs.

Meanwhile, the bank said that negotiations with General Motors to sell off the company would continue even if the company goes under court receivership, with the consent of the court.

Lee Na-Yeon larosa@donga.com