State Bank Shuns More Loans to GM Daewoo

The state-run Korea Development Bank said it will not take part in a paid-in capital increase for GM Daewoo Auto and Technology slated for next Wednesday.

A bank official said Friday, “We hoped that General Motors Co. Chief Executive Fritz Henderson would suggest attractive measures at a news conference Thursday. But he only said GM Daewoo’s paid-in capital increase has received GM’s approval. If our bank’s requests are not accepted, we will provide no support such as an increase in paid-in capital.”

The bank has requested transfer of technology licensing developed by GM Daewoo, the bank’s participation in management, and guarantee of a certain amount of manufacturing volume.

The bank is apparently sticking to its hard-line stance in response to GM Daewoo’s move Thursday to voluntarily repay loans of 125.8 billion won (108.1 million U.S. dollars) due yesterday. The move implies that the company will make no concessions in negotiations with the bank even if the bank attempts to collect loans.

The bank is GM Daewoo’s second–largest shareholder with 27.97 percent of equity, but if it snubs the paid-in capital increase, its stocks worth 130 billion won (111.7 million dollars) will become forfeited stocks available for purchase to GM.

If GM also buys the forfeited stocks of Suzuki Motor (11.24 percent) and Shanghai Automotive Industry (9.89 percent), its equity will grow from 50.9 percent to 70.1 percent. The bank’s equity will decline to around 17 percent.

“As of now, GM’s successful establishment of its own grounds is much more important than KDB’s equity,” a bank official said.

legman@donga.com