GM Daewoo raises 491.2 bln won from GM

(ATTN: UPDATES with quotes, details; AMENDS headline)
By Kim Deok-hyun
SEOUL, Oct. 23 (Yonhap) -- General Motors Corp. has bought all new shares offered
by its cash-strapped South Korean affiliate, worth 491.2 billion won (US$412.7
million), in a move to save GM Daewoo Auto & Technology Co., company officials
said Friday.
The decision by GM to subscribe for the entire issue is likely to somewhat ease
the liquidity crunch facing GM Daewoo, which is increasingly becoming a global
center for the U.S. automaker's small-car design and engineering strategy,
analysts say.
But GM Daewoo is still struggling with its dire financial position and GM needs
to make concessions to the state-run Korea Development Bank (KDB) to get fresh
loans to help the Korean unit develop new cars, they say.
Previously, GM Chief Executive Officer Fritz Henderson said the U.S. carmaker
would buy about 250 billion won of the new shares offered by GM Daewoo, but
company executives said they decided to buy all of them given the importance of
the Korean unit.
"GM's decision to increase its equity in GM Daewoo signifies the importance of
the Korean business unit to GM's global operations," said Nick Reilly, president
of GM International Operations.
"GM Daewoo will continue to play a significant role in the success of the new
GM's global business," Reilly said in a statement. "Any further actions relating
to the longer term funding structure of GM Daewoo will be considered if
necessary."
None of the other shareholders of GM Daewoo, which include KDB, Suzuki Motor
Corp. and Shanghai Automotive Industry Corp., participated in the rights offer,
according to the statement.
KDB, the main creditor of GM Daewoo, is also its second-largest shareholder.
With GM raising its stake in GM Daewoo to 70.1 percent from 51 percent through
the rights offer, KDB's stake will fall to 17 percent from 28 percent.
Since February, cash-strapped GM Daewoo has been in talks with KDB to receive
about 1 trillion won in new loans after exhausting a $2 billion credit line.
The talks reportedly faltered over the scope of GM's financial commitment and
other issues. KDB demanded GM increase the size of the rights offering, arguing
the U.S. parent should raise more money for GM Daewoo.
Amid local newspaper reports that GM may transfer some production lines at GM
Daewoo to China or Mexico, KDB officials also requested GM to guarantee GM
Daewoo's production volumes over the next five years.
The Korean bank also wanted a greater say in GM Daewoo's management.
The bank has warned that unless its demands are met it will withdraw all loans
from GM Daewoo, worth 1.5 trillion won.
Last week, GM Daewoo said it paid back 125.8 billion won in maturing loans to KDB.
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