[Exclusive] Bank Says Ssangyong Could Get Fresh Financing

Korea Development Bank will provide fresh capital to Ssangyong Motors if the company is bought by an entity with verified management capabilities.

On General Motors’ indication that it no longer needs to negotiate with the state-run bank on financing for GM Daewoo, the bank said it could hold talks with GM over the long-term survival plan for GM Daewoo.

A top bank official told The Dong-A Ilbo yesterday, “If the revival plan proposed by Ssangyong Motors is passed by a meeting of relevant officials Friday, the tasks involved in selling Ssangyong will be immediately carried out. If an appropriate buyer steps up in the process, we will provide new financing.”

The bank had remained reluctant to provide new capital other than restructuring costs, including severance packages. This is the first time that the bank has expressed its willingness to provide comprehensive financial support that includes capital for new product development.

Given the high possibility of approval for the revival plan, which centers on write-down and debt-equity swaps, the bank considered that the company needs its main creditor bank’s support to raise its chances of being bought.

On the requirements of the “appropriate buyer,” the bank official said “We believe it should be equipped with accumulated management know-how and capability to handle working capital worth three trillion won (2.5 billion U.S. dollars) after the acquisition.

Nick Reilly, GM`s executive vice president for international operations, indicated at the end of last month that his company has no intention of holding additional negotiations with the bank, saying GM Daewoo can restore normal operations without external financial help.

On this, the bank official said, “Though we should welcome the news as the company’s main creditor bank, the bank need to continue talks with GM as a state-run bank.”

“We won’t continue negotiations that GM Daewoo needs additional financing, but we will keep on talking with GM to provide a platform for GM Daewoo’s long-term survival given the company’s impact on the Korean economy.”

legman@donga.com