Thu, February 18, 2010
Business > Industries

Potential bidders for S Korea's Daewoo draw mixed responses

2010-02-18 10:22:32 GMT2010-02-18 18:22:32 (Beijing Time)  Xinhua English

SEOUL, Feb. 18 (Xinhua) -- Creditors of South Korea's cash- strapped conglomerate Kumho Asiana Group on Thursday reiterated that it will stick to its original plan to sell its construction unit Daewoo Engineering & Construction (E&C) Co. by forming a private equity fund and to go on a debt-equity swap to secure financial investors' (FIs') fund.

The move came despite the group, two of whose units are now put under a debt rescheduling program, recently faced two potential bidders, U.S.-based TR America Consortium and South Korea's STX Group, who showed their interests in purchasing Daewoo E&C.

While creditors are firm on its stance, the FIs are known to mull the new proposals from bidders as it may guarantee them more cash once Daewoo is sold to a new acquirer at a reasonable price.

POTENTIAL BIDDERS FOR DAEWOO E&C

Earlier this week, TR America Consortium was reported to have shown interest in taking over Daewoo Engineering again after it participated as one of the two potential bidders for the company late last year.

The 2009 sale process, for which TR America and Jabez Partners applied, was delayed as the two failed to show their commitments to push the deal through.

Representatives of TR America said they would visit Seoul on Feb. 17-20 for renegotiation, during which it is likely to offer to buy a 50 percent plus one share in Daewoo E&C for 20,000 won ( 17.4 U.S. dollars) a share, 1,000 won (0.87 U.S. dollar) higher than its previous bid and 2,000 won higher than the main creditor Korea Development Bank (KDB)-proposed price.

The consortium is also known to have drawn 70 percent of their funds from strategic investors, reflecting their stronger will for the purchase.

While in Seoul, TR America's representatives will likely express its purchase intent both to the South Korean government and creditors, local media reports said.

Meanwhile, South Korea's STX Group on Wednesday subsequently expressed their interest in acquiring Daewoo E&C's stake, making the bidding more competitive.

After the announcement, STX Group's affiliates saw a tumble in their share prices, with STX Pan Ocean, the top bulk shipper, falling 5.86 percent to 11,250 won (9.8 U.S. dollars) and STX Enpaco, maker of parts for vessel engine, also losing 4.37 percent to end at 10,950 won (9.5 U.S. dollars) at the close of Wednesday' s session.

RESTRUCTURING PROCESS STILL AT STALEMATE

The appearance of potential bidders this week, however, was not fully welcomed by Kumho Asiana's stakeholders, for some of them worried it may hamper creditors' original plan.

Kumho's creditors, led by the KDB, neared a compromise with FIs in late January after a one-month-long dispute on how to recover their loss.

Kumho Asiana decided to put two of its units, Kumho Industrial Co. and Kumho Tire Co., into a debt restructuring process as its planned sale of Daewoo E&C hit a snag, causing a serious liquidity squeeze.

As the sale process went in vain, FIs suffered a major loss due to put-back options which Kumho sold to them with a right to sell Daewoo E&C's shares at 31,500 won (27.1 U.S. dollars) per share in mid-January, 2010.

With the failure of Daewoo E&C's sale, creditors at first suggested to buy back FIs' Daewoo E&C shares at 18,000 won (15.5 U.S. dollars) per share.

Taking the original proposal unacceptable, FIs devised a new alternative to take over management rights of three of Kumho's units by drawing additional funds worth 2.2 trillion won (2 billion U.S. dollars).

The disagreement seemed to hit a breakthrough when the KDB suggested adding a clause of a debt-equity swap, which would guarantee at least the FIs' principal amount from their original investment, to creditors' original plan.

While media reports have said FIs were mostly content with the new plan, things have changed with the reappearance of bidders, as they brought a more tasty option which could reduce the loss amount.

Amid reheated situation, creditors are urging seven of the 17 FIs, who haven't expressed their views on the compromise plan, to submit the approval plan by the end of the week.

Creditors, who are worrying over another delay in Kumho's restructuring process, say as they cannot further give in to FIs and the plans proposed by potential bidders seem to be implausible they will firmly stick to their original plan.

The main creditor KDB clarified that it plans to complete the acquisition of Daewoo E&C by June.

With time pressure put on both sides, creditors and FIs will have to narrow their differences at least by the end of the week, media reports said.

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