Hyundai Construction teeters on the verge of bankruptcy

Hyundai Engineering and Construction (HEC) is teetering on the verge of bankruptcy after failing to meet the requested repayment of bonds with warrants (BW) that it issued on the European market last year.

Fund management officials of HEC said Tuesday that the company was required to pay back overseas BWs worth about US$80 million (90 billion won) by Monday but defaulted. The officials said that they are now raising funds to make the repayment by Nov. 13, when the grace period expires. If HEC fails to pay back the BWs in the Euro currency by that date, it will be declared finally bankrupt overseas. As a result, overseas creditors will swamp the company with claims for early repayment of their loans and the nation¡¯s external credibility will inevitably fall.

However, it remains uncertain how HEC will manage to get the funds to meet its obligations given that domestic creditors have already suspended offers of fresh loans.

HEC officials said that the company is due to hand over US$80 million to Deutsche Bank in the Euro currency by Tuesday in principle, but according to bond contracts, the payment could be deferred by one week. They said that the company would mobilize all its resources to meet the deadline.

Korea Exchange Bank, HEC¡¯s main creditor, also predicted that as the banking sector rolled over the company¡¯s debts, it will be able to solve the liquidity crisis with its own business income.

Some observers predicted that HEC might ask overseas creditors to withdraw their claims for the early repayment of BWs. But HEC dismissed this theory, saying that it remains unaware of who specifically holds the BWs at the moment.