Daewoo’s transfer of $7.5bn abroad irks foreign banks

[Ulhas Joglekar]

DEC 08 1999
The Economic Times Online
Daewoo’s transfer of $7.5bn abroad irks foreign banks
Bill Tarrant
SEOUL 7 December
DAEWOO Corp, flagship of the sinking Daewoo Group, said on Tuesday a
secretive London-based entity funnelled some $7.5bn to overseas subsidiaries
over 18 years.
The transactions, though "not properly accounted for in the accounts of the
Daewoo companies’’ should not impede the workouts for Daewoo companies,
Daewoo Corp said in a statement.
The statement was issued following news of a letter sent by representatives
of Daewoo's foreign creditors saying the latest information made it
"virtually impossible’’ to accept the restructuring plans.
Daewoo's financial adviser told foreign bankers in a briefing on Friday,
Daewoo Corp funnelled the $7.5bn through a previously undisclosed entity,
the British Financial Centre.The briefing allowed an unprecedented glimpse
into the obscurantist finances of a Korean conglomerate, particularly the
spider's web of inter-unit borrowings and guarantees.
"We are convinced that the mode in which Daewoo was operated was outside the
norm of any international business or accounting standards...,’’ said the
letter on Tuesday. The disclosures will have "a far greater impact on Daewoo
and the Korean financial market than we had originally anticipated’’.
But Daewoo Corp said it took the initiative to come clean with foreign
creditors and the transactions would be reflected in the debt workouts for
Daewoo Corp and unlisted Daewoo Motor.
"Accordingly, Daewoo Corporation believes that there is no legitimate reason
that such disclosures should ultimately impede the workout of the
indebtedness of the Daewoo companies, including the settlement of the claims
of foreign creditors...,’’ it said.
But a member of the steering committee representing Daewoo's more than 200
foreign creditors said: "All the accounting practices for Korean companies
are now questionable and all the accounting for Korean banks is
questionable.’’ He said the latest disclosures proved what foreign bankers
had been saying all along — that Daewoo Corp acted as the implicit parent
for other units and subsidiaries in the group. The letter said "any workout
of the Daewoo companies on a company-by-company basis will result in
substantial prejudicial treatment to the foreign creditors’’. — Reuters
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