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Korea top chaebol clear cross debt guarantees

SEOUL: South Korea's Fair Trade Commission said on Monday most of the country's top business groups have done away with debt guarantees among their affiliates.

"As a result of continuous prodding by the government, coupled with efforts made by companies and financial institutions, 33.6 trillion won ($30 billion) in cross debt guarantees at the end of 1997 has been removed," an FTC statement said.

It said the largest conglomerates, including Hyundai, Samsung and. have completely ended their long-held practice of group companies guaranteeing debt held by other group firms.

Seven financially troubled business groups including Haitai, Dong Ah and Kohap were given one-year extensions on 1.3 trillion won in guarantees, the FTC said.

Four other groups have entered the top 30 since the FTC called for a stop to the guarantees and they too have an extra year to end the practice.

Terms of a $58.35 billion bailout led by the International Monetary Fund package which Seoul received in late 1997 called for cross debt guarantees to be abolished.

The interlocking guarantees, which allowed conglomerates to grow rapidly and build up very high levels of debt, were blamed for toppling conglomerates such as the Hanbo Group in the fallout of the Asian financial crisis in late 1997.

The FTC said it would closely monitor companies to ensure there is no recurence of debt guarantees within affiliates or other practices, such as mutual debt guarantees between conglomerates.-Reuters