Creditors end extending loans to S. Korea's Hyundai Group

16:51, July 08, 2010      

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Creditors of South Korea's Hyundai Group said Thursday they decided to halt providing new loans to the conglomerate as it refused to sign the financial reform deal.

According to Hyundai's creditor committee, led by the Korea Exchange Bank (KEB), they informed the 13 creditor banks of the decision, which took effect from local time 9:00 a.m. (0000 GMT).

The decision will have the group's affiliates banned from taking new credits, including loans debt guarantees, the creditors said.

The decision applies to Hyundai Merchant Marine Co., South Korea's biggest bulk carrier, Hyundai Asan Corp., and Hyundai Elevator, while finance affiliates, such as Hyundai Securities and Hyundai Asset Management, are excluded.

The decision came as the group refused the KEB's request to sign the financial reform agreement, while the KEB has asked the group to reach an agreement for three times.

The creditor-proposed plan requires the conglomerate to sell its assets and affiliates to restore the group's financial credibility.

"We are taking a punitive action so as to urge the conglomerate to sign the deal at an early date," an official at the KEB was quoted as saying.

Meanwhile, Hyundai Group is firm on its original position that it will not have the KEB as its main creditor bank anymore and have an evaluation on its financial structure by a new creditor, expected to continue its conflict with the KEB.

The core of the clash lies in the sale of Hyundai Engineering & Construction, the construction firm now held by KEB and other creditor banks, but the Hyundai Group is seeking to take over.

Once the conglomerate is put into the financial restructuring, it will run out of cash that it has been planning to use for the takeover of the construction firm, which is the reason the conglomerate is firmly sticking to a rather radical move, market observers say.

Hyundai Group is in need of taking over the construction firm as it holds an 8.3 percent stake of Hyundai Merchant, the group's de facto holding company, without which the group may be threatened on the control of the bulk carrier.

As South Korea's second-largest conglomerate Hyundai Motor Group, which was split off from Hyundai Group, is now bidding for the Hyundai Engineering, the M&A competition, as well as the clash between Hyundai Group and the creditors, may grow more harsh down the road, according to local analysts.

Source:Xinhua

(Editor:黄蓓蓓)

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