HEC decides to entrust sale of Sosan Farm to KOLAND

Hyundai Engineering and Construction Co. (HEC) said Monday that it has decided to entrust the sale of its Sosan farmland to the state-run Korea Land Corp. (KOLAND) and receive an advance payment of about 270 billion won from the corporation.

In addition, the company said that it has decided to arrange an additional self-rescue plan by Nov. 15 including specific measures such as the consignment sale of Sosan land and the donation of private wealth by Chung Mong-Hun, chairman of Hyundai Asan Corporation.

However, even if HEC presents a convincing self-rescue plan, the government would like to see large shareholders offer written consent for capital reduction and a debt-for-equity swap to creditors to make sure they fulfill the plan faithfully. The HEC announcement raised the possibility that the HEC crisis could be settled by Nov. 15 when the company will unveil additional self-help measures such as the sale of Sosan land and submit a written agreement on a debt-for-equity swap.

KOLAND said that it will pay HEC up to 75 percent (270 billion won) of the Sosan farmland¡¯s officially appraised value (360 billion) even before the land is sold. Officials said that the corporation will set the exact scale and date of the payment as soon as the problem of guarantee by a financial watchdog is solved. For the deal with HEC, KOLAND decided to take out a loan worth 200 billion won from the Housing and Commercial Bank and is now negotiating over interest rates for the loan.

The sale of the Sosan, regarded as a key element in HEC¡¯s self-rescue plan, is showing signs of helping the situation. It is reported that Chairman Chung Mong-Hun plans to announce a self-rescue plan to raise about 800 billion won in person on Nov. 15.

The plan will include the sale of the Sosan farmland, the donation of private wealth by group founder Chung Ju-Yung and Chairman Chung Mong-Hun, the sell-off of HEC¡¯s stakes in affiliated companies and the company¡¯s real estate.

Meanwhile, Financial Supervisory Commission Chairman Lee Keun-Young held a news conference Monday and said that if HEC¡¯s self-rescue plan is convincing, the company would not be forced to agree on a debt-for-equity swap, but creditors could demand a written agreement to ensure the fulfillment of the self-rescue plan.

Chairman Lee pointed out that creditors had already agreed not to offer fresh loans to HEC by the year¡¯s end. He said, if creditors find HEC¡¯s self-rescue plan effective enough, they could consider offering additional assistance, but all creditors would have to agree.

In a related development, HEC announced that it had repaid about US$20 million of US$80 million worth of bonds with warrants (BW), which came due Monday, and is now consulting with overseas investors for ways to pay back the remaining $60 million in installments.

Lee Byong-Ki eye@donga.com