Analysts warn Hyundai's W1 tril. self-rescue package not enough Hyundai Engineering & Construction's (HEC) possible success in arranging a 1 trillion-won ($876 million) self-rescue package may temporarily appease market jitters, but will fall short of defusing the ailing contractor's fundamental liquidity problems, analysts said. U.S. brokerage Merrill Lynch warned in a report that HEC could slip into a fresh liquidity crisis next year, particularly in light of the sluggish construction sector, even if its 1 trillion won self rescue plan is implemented this year.

The Hyundai crisis will persist without clear and drastic solutions from the government and creditors, it said.

It also cautioned that Hyundai Motor, spun off from the Hyundai Group in September, and Hyundai Heavy Industries (HHI) may suffer financial and managerial setbacks, if their cash aid is included in HEC's self-rescue scheme.

HEC, saddled with an estimated 5 trillion won in debts, was given by Dec. 31 to reduce the debt load to less than 4 trillion won through sweeping restructuring, or face court receivership.

The outlook for HEC's survival is clouded even for now since the sale of a 160 billion won Hyundai Group headquarters building in downtown Seoul, an integral part of the 1 trillion-won package, has stalled, due to the group's internal strife.

After Hyundai Motor and HHI refused to purchase the HEC-owned building last week because of pressure from shareholder, Hyundai Merchant Marine (HMM), a shipping unit, is being mentioned as the next candidate, according to Hyundai officials.

"HMM, a de facto holding company for the Hyundai Group companies controlled by Chung Mong-hun, the largest shareholder in HEC, is the most desirable buyer of the group building," said an aide to Chung.

"HMM may be able to buy the building by selling off parts of its real-estate assets. Otherwise, Hyundai Electronics Industries and other group companies will have to jointly acquire the building," he said. HMM already owns two large-scale office buildings in downtown Seoul.

But the proposal looks bound to fail, as HMM executives denied interest in the building. "HMM has not received any formal proposal on the building acquisition. No considerations have been given to the idea," a company spokesman said.

HEC put up for sale six floors of the 14 storied Hyundai Group building and as many floors of its annex, alleging they are worth 170 billion to 180 billion won, compared with a market valuation of less than 160 billion won.

Over the weekend, the government and creditors demanded that Hyundai hurriedly settle the building sale and present its delayed rehabilitation measures for HEC by this noon. "Delayed announcement of Hyundai's self-rescue package is deepening distrust from the market. The government and creditors asked Hyundai to finalize the package by Monday morning," said a spokesman for the Financial Supervisory Commission.

Against this backdrop, local economists and even the state-run Korea Development Institute are stepping up calls for immediate liquidation of HEC, citing little hope for its turnaround. Prof. Chung Un-chan of Seoul National University, a renowned economist, said Thursday that HEC and other terminally ailing and nonviable enterprises should be immediately put on the path to liquidation.

On Friday, HEC indefinitely put off the announcement of its self-rescue measures after its failure to persuade HHI management. Earlier on Thursday, Chung managed to receive Hyundai Motor's pledge to extend 216 billion won in financial support, though Hyundai Motor union issued a strong opposition. The self-rescue package was also to contain the sale of a farm south of Seoul worth 600 billion won, a commitment to separate Hyundai Electronics Industries from the rest of the group by 2002 and a 40 billion won private wealth investment from Chung.

By Yoo Cheong-mo Staff reporter

http://www.koreaherald.co.kr/SITE/data/html_dir/2000/11/20/200011200018.asp

-- Carl Jenkins (somewherepress@aol.com), November 19, 2000