Losses reaching 2.9 trillion won, HEC faces full capital erosion

The government and creditors are considering a debt-for-equity swap involving Hyundai Engineering and Construction (HEC) after it was confirmed that the company is in a state of full capital erosion. The debt-for-equity swap, if realized, is expected to be worth about 1.4 trillion won. According to Korea Exchange Bank (KEB), Hyundai`s main creditor bank, and Samil Accounting Corp. Tuesday, the construction firms` losses have reached 2.9 trillion won, completely eroding its capital.

Losses amounting to 2.9 trillion won have been virtually confirmed and reflect 50 percent of uncollected payments for its overseas projects, such as those in Iraq, additional losses of 500 billion won, and 400 billion won to 500 billion won in losses from the disposition of securities, the KEB said.

Ordinary losses such as interest payments and losses from the disposition of assets were calculated at 500 billion won and 300 billion won, respectively. At the end of last year, the troubled builder`s net worth was estimated at 2.1 trillion won, indicating that its capital erosion surpassed its net worth by more than 800 billion won.

Consequently, any debt-for-equity swap would have to be worth at least 800 billion won, KEB and Samil Accounting Corp. said. Samil plans to officially release its report on the firm`s auditing results Wednesday.

[Yonhap]