UPDATE: GM Daewoo: No Offer From KDB To Increase Stake In Co
May 01 2009 - 5:43AM
Dow Jones News
GM Daewoo Auto & Technology Co. hasn't received an offer
from Korea Development Bank to buy an additional stake in the South
Korean unit of beleaguered General Motors Corp. (GM), a company
executive said Friday.
"No such talks have been held with KDB," GM Asia Pacific
President Nick Reilly said in a press briefing held in downtown
Seoul.
He made the comments in response to local media reports that the
state-run bank may buy an additional stake in GM Daewoo to help the
cash-strapped company.
KDB is GM Daewoo's second-largest shareholder with a 28% stake.
The rest of the South Korean carmaker is owned by GM and
GM-affiliated companies.
But Reilly didn't rule out the state bank taking an additional
stake in GM Daewoo, saying "if that helps (us) find long-term
solutions, we will talk about that with the KDB."
As for a recent report that KDB has sought an additional 30%
stake from GM Daewoo, he said, "that is not true."
Reilly also said the currency forward contracts extended by
three months by eight South Korean banks, including KDB, are worth
about $500 million.
"The remaining 50% of currency forwards (coming due in May-June)
will be paid on time...from next week as planned," said Reilly, who
is also a GM group vice president.
He said GM Daewoo ran into its liquidity problems due to its
heavy dependence on exports and heavy losses from currency hedging
contracts that resulted from the "dramatic" appreciation of the won
against the dollar.
GM Daewoo said last month that it was carefully managing cash
flow, and liquidity could be "critical" in the second quarter
without external aid.
In February, GM Daewoo asked KDB to extend fresh loans - which
were reportedly worth KRW1 trillion - after it used up a $2 billion
credit line.
Even if GM ends up declaring bankruptcy, however, "GM companies
in Asia-Pacific region will remain part of the newly-restructured
GM," said Reilly.
After posting three straight years of full-year net profit from
2005-2007, GM Daewoo shifted to a net loss of KRW875.69 billion
($663 million) last year from a net profit of KRW540.51 billion a
year earlier.
-By Kyong-Ae Choi, Dow Jones Newswires; 822-2198-2236;
kyong-ae.choi@dowjones.com