Hyundai Construction takes 1st step to self-rescue

Hyundai Engineering and Construction (HEC) seems to be heading toward resuscitation through self-rescue efforts. Although there is a last-minute struggle around the announcement of the self-rescue plan, many have expressed their opinion of the possibility of successful self-resuscitation.

The steep rise in the stock prices of Hyundai Group affiliates on Tuesday reflects such optimism.

"The current fund for the support of the self-rescue plan has earmarked at 800 billion won, and the board meeting with the Hyundai Motors Chairman Chung Mong-Koo and Hyundai Asan Chairman Chung Mong-Hun seems headed in the right direction," HEC president Kim Yoon-Kyu said. "We will announce the detailed self-rescue measures as soon as possible."

A government source said, "Of the three scenarios considered by the government, the best course seems to have been taken."

The pivotal cause for the sudden turn of events was the change in the government's position. For some time, the government has taken a hard line in dealing with HEC. Especially last month, as HEC failed to meet its debt obligation while HEC chairman Chung Mong-Hun still was out of the country, many government officials said that the time is ripe to deal with the procrastinating habit of HEC and teach it a lesson.

Of the three scenarios proposed by the government -- self-rescue, debt-to-equity conversion and court receivership -- the government frequently mentioned court receivership as a threat to force HEC to act. However, as the possibility of court receivership came closer to reality, the government itself began to be burdened.

The government realized the possible detriments in the foreign construction contracts should HEC collapse, as Daewoo and Dong-Ah construction companies have for the most part closed down.

"Although HEC has a problem in liquidity, it would be a shame to let it fall in the light of its capabilities and recognition abroad," an official of the Ministry of Finance and Economy said early in the month.

Another factor that softened the government's position was the voice of the public opinion, criticizing the government's business structural reform, which only focused on the company finance and fell short in considering productivity and potential.

"There is a need for harmony between financial and business policies," Minister of Finance and Economy Jin Nyum began to stress recently

While the government has refrained from public fund support, which could be interpreted as a "favor," it has taken a strong stance in pushing HEC to adopt a self-rescue plan through restructuring and sell-off of its Sosan Farm.

However, considering that HEC¡¯s woes have yet to be alleviated, the government and the financial market feel a necessity of the major stockholder of HEC, its chairman Chung Mong-Hun, coming to better terms with his family members, at least with chairman Chung Mong-Koo. Also, the true possibility of success of the self-rescue plan will depend on the sincerity and practicality of the self-rescue measures.