HEC reveals self-rescue plan, to spin off HEI, HHI next year

The Hyundai Group announced Monday a self-rescue plan for ailing Hyundai Engineering & Construction (HEC) valued at 1.29 trillion won ($1.14 billion). The plan includes selling off the group headquarters building in Kye-dong, downtown Seoul.

Chung Mong-Hun, chief director of Hyundai Asan and de factor owner of HEC, announcing the self-help plan at the headquarters building this afternoon, also said that the group will strive to spin off Hyundai Electronics Industries (HEI) in the first half of next year followed by Hyundai Heavy Industries (HHI) in the latter half of the year.

According to the plan, group founder Chung Ju-Yung will conduct a debt for equity swap of 170 billion won in company bonds and will sell his stake in Hyundai Motor, worth 90 billion won. Chung Mong-Hun will also raise 40 billion won by selling his stakes in Hyundai affiliated companies and turning the proceeds over to the HEC. The company's Sosan Farm will also be sold, bringing in 600 billion won. The sale of the headquarters building will add another 162billion won.

More money will be raised by selling its steel structure plant in Inchon (40 billion won) and 8,962,000 shares in Hyundai Merchant Marine (HMM)(29 billion won) owned by HEC. The group will also furnish 166.4 billion won through the existing self-support measures, excluding the sale of assets for business purposes.

If the headquarters building is not sold off by the end of this month, the group will entrust the main creditor bank, Korea Exchange Bank (KEB) with the right to dispose of it. The group will give up managerial rights of its financial institutions, investment trust & securities and investment management divisions, and seek investment from the American International Group (AIG) to foster them as an international financial group, Chung said.

Since HEC is set to sell all 8.96 million shares in HMM, it will no longer be the largest shareholder or the holding company. HEC plans to sell the HMM shares to secure the liquidity of 29 billion won.

The Hyundai Group also decided to conduct a debt-equity swap of 170 billion won in HEC-issued bonds owned by group founder Chung Ju-Yung. The group already entrusted Investment Bank with the task of disposing of Chung Mong-Hun¡¯s stake in affiliated firms. The proceeds will be invested in HEC.

It planned to sell Sosan Farm directly to buyers, but has asked the Korea Land Corporation to sell it in a bid to improve public trust and the fund mobilizing capability. Of the proceeds from the sale, which should amount to at least 600 billion, the group plans to secure 300 billion won by the end of this year and the rest by early next year. Family members of the founder will purchase 1.5 million pyong (4.95 million square meters) of the farm, a group spokesman said.