KDB set to find new buyer for shipyard after deal breakdown

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SEOUL, Jan. 22 (Yonhap) -- The state-run Korea Development Bank (KDB) said
Thursday it plans to put Daewoo Shipbuilding & Marine Engineering Co. back on the
block after scrapping a deal to sell a controlling stake in the shipbuilder to
Hanwha Group.

Rejecting Hanwha's demand for the revision of sale terms, KDB's board decided
Wednesday to abort what would have been the shipbuilding industry's largest
acquisition to date.
"We will seek to resume the sale of Daewoo Shipbuilding after monitoring market
conditions," the lender said in a statement officially announcing the rupture of
the deal. "Before putting the shipbuilder up for sale again, we will try to boost
its corporate value by selling non-core assets and improving management
efficiency."
The state lender said it will also seize a deposit of 300 billion won (US$220
million) that Hanwha put up for the deal.
"Hanwha's fundraising plan was not enough to complete the deal, and its demand to
revise terms can not be accepted," the bank said. "Going ahead with negotiations
could negatively effect the financial stability of both Hanwha and Daewoo
Shipbuilding & Marine Engineering."
The aborted sale is expected to hurt government efforts to privatize firms that
received cash injections using taxpayer money after the 1997 financial crisis.
The sale of Daewoo Shipbuilding is seen by many as a litmus test of those
efforts, which are aimed at selling such companies as Hynix Semiconductor Inc.
and Hyundai Engineering & Construction Co.
Hanwha signed a preliminary deal with KDB on Nov. 14 to buy a 50.4 percent stake
in the world's third-largest shipyard without a due diligence due to opposition
from the shipbuilder's union.
But a self-imposed year-end deadline to seal the deal was delayed by one month as
Hanwha demanded it be allowed to pay the 6.3 trillion won for the stake in
installments, citing difficulties in raising funds amid a credit crunch.
KDB last week urged Hanwha to come up with a detailed and realistic plan for
funding the acquisition and threatened to scrap the deal if Hanwha fails to
finalize it by the end of the month.
There had been growing speculation that talks on the sale would break down if KDB
didn't revise terms of the sale.
Hanwha wanted to cut the price tag as shares of Daewoo Shipbuilding had halved
from six months earlier, hit by the global financial turmoil and concerns about a
decline in shipbuilding orders.
KDB proposed to set up a private equity fund with institutional investors to buy
assets offered by Hanwha Group instead of accepting Hanwha's demand for payment
in tranches.
Daewoo Shipbuilding ended a debt rescheduling program in August 2001 after being
placed under the program in August 1999, after its parent Daewoo Group collapsed
under heavy debt.
Shares of Hanwha Corp., Hanwha's de facto holding company, closed at 28,550 won
on the Seoul bourse, up 10.87 percent, while those of Daewoo Shipbuilding fell
4.44 percent to close at 19,350 won.
sam@yna.co.kr
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