By Kang Seung-woo
Staff reporter
Korea Exchange Bank (KEB) and other creditor banks said Thursday that they have decided not to open a new line of credit for Hyundai Group.
The decision followed Hyundai's repeated refusal to sign a KEB-recommended debt restructuring plan. Hyundai said that the plan didn't reflect its unique business portfolio, adding that it would replace KEB as its main creditor through paying off its debts to the bank if necessary.
In response, Hyundai's 13 creditors, led by KEB, decided to take collective punitive action.
With the decision, the banks said that Hyundai Group and its subsidiaries, including Hyundai Merchant Marine and Hyundai Asan, will not be allowed to take out new loans starting immediately.
The committee, headed by KEB, consists of major local lenders, including the Korea Development Bank (KDB), Shinhan Bank and the National Agricultural Cooperative Federation, also known as Nonghyup.
Hyundai Group, led by Chairwoman Hyun Jung-eun, was selected in May as one of nine financially distressed conglomerates to go through debt rescheduling to improve large industrial firms' financial soundness.
However, dissatisfied with the ruling, the group refused to sign an agreement on debt rescheduling, calling for a new assessment of its financial status.
"There is no time limit on this penalty," a KEB representative told The Korea Times.
"And if Hyundai Group continues to refuse to accept the assessment of its financial situation, creditors plan to impose more pressure."
He said that if Hyundai continues to refuse to sign onto the restructuring recommendations, the committee will not roll over any maturing loans.
Despite the feud, KEB has left the company room to maneuver.
"Once Hyundai Group signs the agreement, we will lift the ban immediately," he said.
However, Hyundai is standing firm in its opposition, announcing that it still refused to accept the financial assessment
"As we expected the creditor banks' measure, we announced our stance on Tuesday. We have not changed since then," a Hyundai Group representative told The Korea Times.
The firm said that it need not sign the deal to restructure debts, insisting that the KEB's financial appraisal was inaccurate.
"KEB's evaluation was based on last year's records and did not reflect the improvements Hyundai Merchant Marine made in the second quarter of this year," he said.
Hyundai's debts rose last year as Hyundai Merchant Marine suffered a heavy loss due to a slump in the shipping sector, but it bounced back in the April-June period of 2010, posting 154 billion won ($127.2 million) in operating profit.
"We will make a final decision after seeing whether creditors will push ahead with their plan to stop issuing new loans," the representative said.