Banks yet to complete Daewoo disposal

The recent agreement in principle by Posco to purchase Daewoo International Corp. from creditors marks the latest stage in the disposal of assets of the once-mighty Daewoo Group, which collapsed in 1999 under heavy debts in the wake of the Asian financial crisis. When bank creditors took over control of the group they discovered that 12 of the group’s main affiliates owed a total of 86 trillion won ($68.7 billion) in debts while their assets were valued at 62 trillion won.
The debt restructuring of Daewoo, which ranked as Korea’s second largest conglomerate when it collapsed, has been a slow process, with creditors still unable to find buyers for some Daewoo subsidiaries as they seek to recover their loans.
For example, even though Posco was selected as the preferred bidder for Daewoo International, the group’s trading arm, earlier this month, it said it had put off plans to possibly acquire Daewoo Shipbuilding and Marine Engineering because it wanted to focus on absorbing Daewoo International.
Daewoo was founded in 1967 by Kim Woo-choong and boasted more than 20 subsidiary companies by the 1990s in businesses ranging from electronics and cars to construction and securities.
Some of these businesses were seen as viable concerns in spite of their debt problems. Daewoo Motor was acquired by General Motors in April 2002 despite strong resistance by its labor union worried about layoffs.
GM viewed the company, renamed GM Daewoo Auto and Technology, as providing a foothold in the Korean car market and initially decided to retain the Daewoo brand name because it was familiar to local consumers.
But GM now intends to drop the Daewoo badge and rebrand its cars as Chevrolets. Daewoo was once the second-best-selling brand in the country, but now GM Daewoo now lags behind third-ranked Renault Samsung Motors in terms of local sales.
Daewoo Heavy Industries was split into two groups: shipbuilding and machinery. The machinery business was taken over by Doosan Group and was renamed Doosan Infracore.
But Daewoo Shipbuilding has still not attracted a buyer. A bid by Hanwha Group to buy the shipbuilder, which was valued at 8 trillion won when it was put up for sale in 2008, failed due to a lack of sufficient financial resources.
Daewoo Engineering and Construction was sold to the Kumho Group, but its acquisition caused financial problems for Kumho as it had to assume new debt. Kumho requested a debt restructuring in December as a result and Daewoo Engineering will be taken over again by its creditor, Korea Development Bank.
Daewoo Electronics has also been unable to find a buyer and remains in the hands of creditors, along with other units, such as Daewoo Securities.
Daewoo Motor Sales was taken over by its employees after the breakup of the Daewoo Group, but now faces the threat of bankruptcy after GM Daewoo severed its ties with the company in March.