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Daewoo foreign bankers finalising debt buyout deal

SEOUL: South Korea's troubled Daewoo Group and a committee representing its foreign creditors are nearing agreement on the final terms of a debt buyout deal, official and banking sources said on Wednesday.

"We would like to get it done by the end of this week," said a source on the foreign creditors' steering committee. "I don't think we're far apart and both sides want to get it settled as soon as possible."

Daewoo's chief negotiator agreed with that assessment.

"Yes, I think so. It should be any day now," Oh Ho-keun, the head of the Corporate Restructuring Coordination Committee (CRCC), told Reuters.

The CRCC represents Daewoo's domestic creditors, who put 12 Daewoo units under a debt restructuring plan last August after rescuing the group from imminent bankruptcy through an injection of emergency funds.

The Daewoo Group had combined liabilities of 89 trillion won ($79.6 billion), or nearly $25 billion more than its assets as of last November.

DEAL PAVES WAY FOR SALE OF DAEWOO UNITS

The foreign debt buyout would clear the way for the sale of key Daewoo units, such as Daewoo Motor, Daewoo Electronics Co and Daewoo Heavy Industries, whose assets have steadily deteriorated in value since the crisis erupted in the middle of last year, analysts said.

Daewoo and the steering committee agreed in principle in late January on a cash buyout of Daewoo's foreign debt at a weighted average recovery rate of between 39 and 40 percent of the face value of $4.84 billion in unsecured loans.

The debts are owed by Daewoo Corp, Daewoo Motor, Daewoo Electronics, Daewoo Heavy Industries and their overseas subsidiaries.

The remainder of Daewoo Group's total foreign liabilities of $6.6 billion is collateralised.

The steering committee source said banks holding secured debt have the option to be paid from the cash flow on that security or take the recovery rate offered for unsecured debt.

The foreign creditors' steering committee is comprised of Chase Manhattan Bank, HSBC Holdings Plc, Bank of Tokyo-Mitsubishi Ltd, Dai-Ichi Kangyo Bank Ltd, Citigroup Inc's Citibank, ABN Amro Bank, National Australia Bank Ltd and Arab Bank.

WARRANTS STICKING POINT IN DEAL

The talks in New York on finalising the debt deal have been hung up on how much money foreign creditors would be entitled to in "out-of-money" warrants.

The warrants allow for additional money to be paid to foreign creditors if the financial situation of the Daewoo units they lent to improved.

"The last point has been the warrants," said Oh, Daewoo's chief negotiator. "There have been a number of issues resolved one by one and the warrants are the last one."

Once the final terms of the deal are agreed, Daewoo and the steering committee are to launch a road show to sell it to the group's more than 200 foreign creditors around the world.

The settlement takes effect when creditors accounting for at least 90 percent of the total foreign debt owed by four Daewoo affiliates agree to the terms of the buyout.

Oh said he expected foreign creditors to submit their tenders for the debt buyout within two to three weeks after the deal is signed and Daewoo Group would take another week or so to complete the reconciliation process.

Daewoo's domestic creditors are setting up a special-purpose corporation to buy the debt, which in turn is to be purchased by state-run Korea Asset Management Corp at market rates.-Reuters