You are here: Home » Reuters » News
Business Standard

Exclusive: South Korea's KDB eyeing deal by April 27 to inject funds into GM Korea

Reuters  |  SEOUL 

By and Ju-min Park

(Reuters) - (KDB) plans to sign a preliminary deal by April 27 to financially support General Motors' troubled South Korean unit, provided interim due-diligence on the unit is satisfactory, the of state-run said on Tuesday.

GM proposed in February an investment of $2.8 billion into its loss-making South Korean operations over 10 years, days after announcing a sweeping overhaul. It has asked to provide its share of the funds for the restructuring.

The U.S. automaker owns 77 percent of its South Korean unit, GM Korea, while owns a 17 percent stake. GM's main Chinese partner, SAIC Motor Corp, controls the remaining 6.0 percent.

Lee Dong-gull, and CEO of KDB, told the may offer around 500 billion won ($468.42 million), proportional to its 17 percent stake in GM Korea, to help fund GM's pledged $2.8 billion investment.

This is the first time has raised the possibility of financially backing and offered a time-frame for a decision. The and South Korean officials have so far been non-committal. But GM Korea's losses have mounted and the U.S. automaker has raised the prospect of the unit filing for bankruptcy.

"If GM injects equity into the unit, we will inject equity. If GM extends loans to the unit, we will extend loans as well," he said, adding prefers to take part in a rights offering rather than lending to the unit.

"We may be able to reach a very meaningful agreement by April 27, whether it is a verbal promise or conditional MOU," he said.

The said its interim due diligence report on is scheduled to be out on Friday, but has not so far submitted sufficient documents for to assess its financial viability.

He said the would be able to sign a legally binding deal with the U.S. automaker only after a final report is out in late April or early May.

"We are in continued discussions with the and the government with intent to inject new funds and covert debt into equity," a said.

GM's told last week that common ground must be reached on a long-term restructuring of by this Friday and if there was none, the operation would likely seek bankruptcy protection.

Lee said would have no choice but to consider taking "appropriate legal action" should the U.S. automaker opt to liquidate its South Korean unit without consulting the

GM shocked in February with plans to close one local plant and leaving the fate of three others unclear. It is seeking government funding and incentives as well as labour cost cuts to save the unit, which in 2017 posted a net loss of $1.1 billion, its fourth straight year in the red.

was one of GM's major and engineering bases in after its 2002 purchase of failed South Korean But the unit has struggled in recent years from GM's exit of its brand from Europe, which hit its exports to the major market.

($1 = 1,067.4100 won)

(Reporting by and Ju-min Park; Editing by Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, April 17 2018. 12:55 IST