SK Global rescue talks continue
Foreign creditors reject 40 per cent cash offer as some banks demand up to 80 per cent of their debt
Negotiations over the rescue of SK Global will enter another round in Hong Kong today after foreign creditors rejected a token top-up of the previous 40 per cent cash offer to buy out their debt.
'There's still a gap between us, but we continue to talk,' a source close to the rescue talks said. A nominal improvement was made on the 40 US cents in the dollar previously offered to foreign creditors of the fraud-tainted chaebol (family-owned industrial empire), but it was knocked back.
It is understood some foreign banks have demanded a cash offer of up to 80 per cent of their debt, while others have put a benchmark of 68 per cent on the table.
Talks will resume today, and may be extended to tomorrow. The only consensus so far seems to be that not one foreign creditor is willing to accept the 40 per cent offer.
The Hong Kong arm of SK Global owes an estimated US$560 million to creditors, with 34 creditor banks and a number of bond holders involved, while the overall debt of Korea's third-largest conglomerate is in the region of US$5.2 billion.
Attempts to hammer out an agreement have taken on a sense of urgency in recent days as domestic creditors of SK Global have threatened to file for liquidation in Korea should the foreign banks fail to agree to restructuring terms by July 18. Carving up the chaebol would cost more, take years, and ultimately lead to lower returns.
For this reason, most banks favour a restructuring, 'but not at any price', another source said yesterday.
Foreign creditors have taken the July 18 deadline with a pinch of salt. 'It's their deadline,' the source said. 'If they are sticking to their timetable, their time is running out.'
In Hong Kong, the finance-raising arm of SK Global has managed to stave off liquidation attempts by other creditors through the courts. Credit Lyonnais has been attempting to enforce a US$8 million judgment that would trigger winding-up proceedings.
The Court of Appeal has given SK Global Hong Kong until July 21 to thrash out a concrete rescue plan, after which Credit Lyonnais may take steps to enforce the US$8 million debt.
Other creditors are known to be withholding their hand pending the outcome of rescue talks. Both Arab Banking Corp and Banca Nazionale del Lavoro have indicated they will seek a winding-up order, it emerged during the court hearing this week.
Korean creditors agreed to restructuring terms on June 17. Since then, it emerged that SK Global's lenders were being investigated over their loans to the trading company. Newspapers in Korea claimed that Hana Bank and other creditors helped SK Global hide nearly US$1 billion in debt.
Hana Bank has warned foreign creditors that they stand to get back just 10 per cent of their loans should SK Global go into liquidation.
The 40 per cent restructuring offer was based on the findings of a Korean accounting firm into the affairs at the bank. Foreign creditors have however rejected the report by Samil Accounting Corp, saying the audit failed to show how SK Global incurred its losses.
Foreign creditors such as Credit Lyonnais have moreover expressed concern over the current management of the company in Hong Kong.
The bank has said liquidation is one avenue it would consider to claw back part of its debt.
