Hyundai's Founder Sells Shares
Tuesday, August 22nd 2000, 12:00 am
By: News On 6
SEOUL, South Korea (AP) â€” Bowing to pressure from creditors, the founder of South Korea's largest conglomerate, Hyundai, sold a 6.1 percent stake in its carmaking division on Tuesday.
The sale of Chung Ju-yung's stake in Hyundai Motor Co. was one of the key demands of creditor banks who want a radical restructuring of the financially troubled conglomerate.
The sale reduced Chung's stake in Hyundai Motor to 3 percent, clearing the way for the group to spin off the carmaking firm as part of its proposed restructuring plan.
The 12.71 million shares were sold to the (Korea) National Pension Fund and local retail investors at an open auction in the Korea Stock Exchange for about $14 each, or about $178 million.
Yoo Keun-chan, a group spokesman, said no stock was sold to foreign institutional investors. Hyundai had been in talks with U.S. securities firm Jardine Fleming to sell a 5.0 percent stake in the carmaker.
``Jardine Fleming did not buy a single share. Their proposed buying price was too low,'' said another Hyundai official, Lee Young-ju.
Hyundai plans to use the money from its founder's stock sale to buy three-year corporate bonds issued by its ailing Hyundai Engineering and Construction Co.
Hyundai's main creditor, the state-funded Korea Exchange Bank, has threatened to revoke a pact to roll over the maturing loans of Hyundai's construction subsidiary if the group's restructuring plan proved unsatisfactory.
Hyundai creditors believe that Chung is personally responsible for the financial woes of the construction subsidiary which remains under his control. They insisted that Chung use his personal wealth to prop up the ailing firm.
Hyundai, a typical South Korean conglomerate, is a network of several dozen affiliates interlocked through cross-funding and cross-ownership.
Family members of the group control the entire business group by holding large chunks of a few key companies.
South Korea's conglomerates expanded through cheap loans during the nation's boom years until the 1980s.
But sales slowed when the nation was struck by the regional financial crisis in late 1997, forcing South Korea to accept a $58 billion bailout from the International Monetary Fund.
The government of President Kim Dae-jung, which took office at the beginning of the Asian financial crisis, has pledged to restructure the nation's inefficient financial sector and the overstretched conglomerates.
After its construction unit received $167 million in emergency funds from creditors in mid-May, Hyundai announced a restructuring plan that also included retirement of its founder and his two sons Mong-ku and Mong-hun, who head the group's carmaking and electronics units, respectively.
Hyundai said it would also sell stock and real estate worth $4.9 billion and all or part of Hyundai Elevator Co. so it can focus on core businesses, including automaking, shipbuilding and electronics.