By Kim Jae-won
The head of the Korea Development Bank (KDB) said that the bank plans to take over Daewoo Engineering & Construction (E&C) and will raise one trillion won in capital in order to make a strategic investment into the builder.
At a press conference Thursday, KDB CEO Min Euoo-sung said, “The lender will seek to support social infrastructure projects of the builder through project financing (PF) to create synergy between finance and construction.”
“With a one trillion won capital increase, we plan to improve the financial health of Daewoo and strengthen its engineering unit through the strategic investment,” he added.
Min said that its negotiation with General Motors (GM) on how to support GM Daewoo, the local unit of the U.S. carmaker, is expected to be completed in a few weeks.
“There is significant progress in the negotiation with GM Daewoo. We agreed with GM over the big picture and a rough direction,” Min said.
“However, it does not mean that we can sign with GM right now. We are currently negotiating five issues, and it is very tight.”
The former chief of Lehman Brothers’ Seoul office said the negotiations will be finished in a week or two, but did not disclose the topics of the negotiations saying they were very sensitive.
He also said GM Daewoo is an important axis of the local auto making industry.
“GM Daewoo is good partner of us. I don’t have any hostile feeling against it.”
Since February, GM has been negotiating with KDB to receive about 1 trillion won in fresh loans for GM Daewoo after using up a $2-billion credit line.
However, the talks have stalled, with GM balking at KDB’s demands to offer part of its stake in GM Daewoo as collateral and also that GM Daewoo should be allowed to retain licenses for cars it develops itself. KDB has also been demanding the rights to name a co-chief financial officer (CFO) for GM Daewoo.
GM currently controls 51 percent of GM Daewoo, while KDB has a 27.97-percent stake.