Dongbu CNI adds to group's woes.
Byline: Choi Kyong-ae
Dongbu CNI, a key technology unit of the financially troubled Dongbu Group, is unlikely to repay debts maturing next month, raising the possibility of the group being put into receivership.
Any failure to repay debts worth a combined 50 billion won ($49 million) maturing on July 5 and July 12 could put the de facto holding company of Dongbu Group's manufacturing affiliates under a court-led debt rescheduling program, a Financial Supervisory Service (FSS) official said.
"Talks are under way to see if there are ways to help Dongbu CNI resolve the debt problem. But it is main creditor the Korea Development Bank (KDB) and the company that hold the key to a possible resolution."
The state-run KDB has taken a different stance toward Dongbu CNI's debt woes.
"Creditor banks have an exposure worth 34 billion won to Dongbu CNI," a KDB official said. "It looks small given the company ran a total 252 billion won worth of debt as of the end of May.
"The company has garnered most of the debt from savings banks and the issuance of corporate bonds. That's why the banks are less willing to give financial help to Dongbu CNI."
The official warned that if Dongbu CNI was put into receivership, it could affect some of its manufacturing affiliates. Companies that possibly could be affected include Dongbu Steel, Dongbu Hitek and Dongbu Farm Hannong.
He urged Dongbu Group Chairman and Chief Executive Kim Jun-ki to use his own assets or stakes in Dongbu affiliates if he wanted to keep the technology unit afloat.
Dongbu CNI said it planned to raise 15.9 billion won by offering its manufacturing facility in Ansan as collateral. But this is unlikely to be possible before the debt maturing dates.
Meanwhile, creditors have already dealt a blow to the construction-to-finance conglomerate, delaying a rollover of debts worth 70 billion won maturing next month.
Moreover, POSCO on Tuesday withdrew its plan to buy Dongbu Steel's cold-rolled steel plant in Incheon and Dongbu Power's operations in Dangjin in a packaged deal offered by KDB. POSCO cited higher costs and lower synergy.
In November, Dongbu Group announced a self-help plan to raise 3 trillion won through the sale of assets by 2015. It plans to use the money to pay outstanding debts worth 2.35 trillion won.
Hit hard in the 2008 financial crisis, Dongbu has suffered declining orders in the construction and other business sectors. Dongbu says it will focus on four business areas -- finance, steelmaking, electronics and agriculture.
On Friday, all Dongbu Group affiliates ended sharply lower on the main bourse, hit by the growing liquidity woes. Dongbu Steel fell the daily limit of 15 percent at 1,515 won, Dongbu CNI shed 15 percent at 1,955 won, and Dongbu Construction lost 7.62 percent to 1,030 won.