Creditors set to nix Hyundai Group's bid for big builder

Hyundai Group Chairwoman Hyun Jeong-eun By Kim Jae-kyoung, Kim Tae-gyu Creditors have all but decided to scrap their deal with Hyundai Group to hand over a controlling stake in the nation’s top builder, a source at a creditor bank told The Korea Times, Thursday. “There is a 99 percent chance of that,” the source, a bank official, said on condition of anonymity, adding that documents provided by the group failed to prove its ability to raise the required funds for the takeover. Hyundai Group officials didn’t respond to repeated calls for comment. The move is expected to put the sale of the construction company back to square one, as cancellation of the deal means that creditors will have to start over from the beginning. Hyundai Group, led by Chairwoman Hyun Jeong-eun, was chosen as the preferred bidder for a 34.88 percent holding in Hyundai Engineering & Construction (HE&C) for 5.5 trillion won ($4.8 billion), thwarting a bid by its only rival, the Hyundai-Kia Automotive Group. “The main creditors are scheduled to hold a meeting today to vote on whether to cancel the memorandum of understanding (MOU) reached with Hyundai Group to sell the majority stake,” the bank official said. “They also agreed to vote on approval of the share purchase agreement at the same time,” he added. The main creditor of the builder is the Korea Exchange Bank (KEB) with a 25 percent stake, while the Korea Finance Corp. and Woori Bank hold 22.5 percent and 21.4 percent, respectively. If more than 75 percent of all creditors approve the cancellation, the MOU will be nullified, putting the sale of the construction company back into deadlock. For approval of the share purchase agreement, more than 80 percent is needed, meaning that if one of the three major creditor banks opposes it, the deal is dead in the water. The creditors’ move to put both votes on their agenda is interpreted as preparation for a court decision on Hyundai Group’s application for an injunction preventing them from discarding the MOU. “The cancellation plan is not finalized yet but it is highly likely that the creditors will call off their initial deal,” the official said. The move came after the banks determined Wednesday that Hyundai Group had failed to verify its ability to raise enough funds for the acquisition. Following creditors' demands, Hyundai Group submitted documents on two occasions. KEB inked an MOU with Hyundai Group to sell the builder two weeks ago, but growing doubts over the latter’s resources to finance the deal prompted creditors to demand it submit documentation to verify its funding ability. Suspicions mounted as the French unit of Hyundai Merchant Marine, the shipping unit of Hyundai Group, was given a 1.2 trillion won loan from the French Bank Natixis, even though the company's capital stands at only 3.3 billion won. With creditors deciding documents handed over earlier by Hyundai Group were insufficient, the group submitted additional material to them, which it argued were sufficient to verify that the loan from Natixis was legitimate.

kjk@koreatimes.co.krvoc200@koreatimes.co.kr