South Korea to Delay Action on Daewoo

The South Korean government said Sunday it will delay until next month its decision on whether to put Daewoo Corp. into bankruptcy, as domestic banks try to reach an agreement on bailing out ailing parent Daewoo Group.

Lee Hun Jai, chairman of the Financial Supervisory Commission--the government agency in charge of Korea’s corporate restructuring--made the decision to delay action on Daewoo Corp. until January instead of this month at an “emergency meeting” Sunday with heads of Daewoo’s domestic lenders to discuss how to deal with foreign lenders, according to an FSC official in Seoul.

The meeting comes as another government official said Korean creditors plan to reject a proposal from an overseas creditor, which holds nearly a tenth of Daewoo Group’s $73-billion debt, to write off 41% of the group’s debt in a bid to break a two-month standoff.

The government has said it will force local lenders to put Daewoo Corp., the group’s biggest and most indebted unit, into court receivership, should they fail to enlist help from foreign lenders for their bailout effort.

The toppling of Daewoo Corp., the group’s trade and construction unit, could trigger a domino effect of insolvencies at its affiliates and tens of thousands of suppliers, since it served as the financial backbone for the group’s approximately 20 businesses, ranging from shipbuilding to electronics to auto making.

Choi Ouk, an official of the Corporate Restructuring Coordination Committee, which is in charge of Daewoo’s foreign-debt restructuring, said the government plans to send a rejection of the proposal from overseas lenders because the ratio is too low.

Negotiations, however, will continue, he said.

Korean creditors have asked overseas lenders to write off an average 66% of their $6.7-billion Daewoo debt.