Creditors to supply 727.9 bil. won to Daewoo Motor, subcontractors

Creditor banks of Daewoo Motor plan to supply fresh financial assistance worth 727.9 billion won to Daewoo Motor and its subcontractors by the first half of next year. They will raise the funds by selling Daewoo Motor¡¯s bad loans to the Korea Asset Management Corporation (KAMCO).

Twenty-four major creditors of Daewoo Motor, including Korea Development Bank, agreed Wednesday to supply fresh loans for the company¡¯s operations, support subcontractors by offering new loans or exchanging old bills with new ones and sell off the automaker¡¯s bonds to KAMCO.

The creditors will offer a total of 443.6 billion won in operational costs to Daewoo Motor by the end of next June. Of the funds, 89.8 billion won will be offered next month. The initial sum will be used to cover the 40.2 billion won in Daewoo Motor¡¯s raw material costs, 20 billion won in deferred wages and 29.6 billion won in retirement payments.

As for the Daewoo Motor-related bills of subcontractors, estimated to be worth 1.4 trillion won, the creditors will exchange 40 percent or 568.6 billion won worth of the bills with new ones. The exchanges will be conducted on four occasions in March, June, September and December. By the end of next June, half or 284.3 billion won will be exchanged and Daewoo Motor will take care of the rest.

Creditors plan to raise 727.9 billion won by selling off bonds of Daewoo Motor to KAMCO. The two sides are now holding consultations on the sale of 22 percent of the firm¡¯s unsecured bonds and 100 percent of secured funds.

A KAMCO official said that he agrees on the need to revive the company but the price of bonds could be adjusted somewhat.

An official of a creditor bank said that they had in fact regarded the bonds issued before Daewoo Motor went under a workout program as irretrievable, so they do not oppose the price adjustment.

Meanwhile, Daewoo Motor President Lee Young-Kook presented documents containing his company¡¯s self-rescue plan and pledges on restructuring to the Inchon District Court. They included a labor-management agreement signed on Nov. 27, the resignations of 3,000 employees and a petition of factory workers.

Daewoo Motor also set up a window to confirm commercial bills of subcontractors in its Pupyong plant in order to begin operating the factory as soon as creditors decide to supply new loans. The plant is expected to resume operations this weekend.

Lee Na-Yeon larosa@donga.com