Foreign Banks Warned for Delaying Daewoo's Workout
Daewoo Group's domestic creditors sent a final warning yesterday to foreign banks that the entire amount of the group's overseas debts will be subject to a loss sharing scheme unless they comply with the ongoing workout plan immediately.
Korea First Bank, a major creditor of Daewoo Corp., delivered a final message to Daewoo's some 200 foreign creditors through the steering committee that foreign banks need to be prepared for higher losses from the debt rescheduling plan by delaying the workout process.
Of the group's total $5 billion in overseas debts, only $1 billion of which the company borrowed directly from foreign banks has been considered for the loss sharing policy.
The remaining $4 billion, at present, is not subject to the workout plan as the loans are given to Daewoo's overseas subsidiaries independent from the debt rescheduling scheme.
But now domestic creditors threaten that the $4 billion Daewoo Corp. guaranteed for other overseas subsidiaries is likely to be included in the debt rescheduling plan unless foreign banks agree to take part in the workout without wasting more time.
Since foreign subsidiaries are unable to meet the repayments, the responsibility will fall on Daewoo Corp. which is under the workout scheme, local banks said.
The tough stance from domestic creditors came in response to foreign banks' tactics of slowing the negotiation process.
After being presented with over a 50 percent loan loss ratio for major Daewoo units, foreign creditors have argued that they need sufficient time to review the due diligence before agreeing to the plan.
However, the local banking circle sees the strategy of foreign banks in a different perspective, saying that overseas creditors are trying to take a``free ride'' from the planned debt-to-equity conversion. …