South Korean Government initiated its plans to solve current state of GM Korea. Relevant government departments such as Ministry of Strategy and Finance (MOSF), Ministry of Trade, Industry and Energy (MOTIE), and Korea Development Bank (KDB) had face-to-face talks with GM, presented three principles on their support for GM, and discussed about FDD (Finance Due Diligence).
GM promised that it will accommodate suggestions by South Korean Government and submit its plan to normalize its management as soon as possible. However, KDB decided not to participate in additional capital increase requested by GM.
South Korean Government made an announcement that KDB and Vice-Minister Ko Hyung-kwon of MOSF and Vice-Minister Lee In-ho of MOTIE met with Vice-President Barry Engle of GM on the 21st and the 22nd respectively and discussed about their plans to normalize management of GM Korea.
“We presented three principles from our perspective.” said Minister Kim Dong-yeon of MOSF regarding a meeting between Vice-Minister Ko of MOSF and GM. “We are going to respond to these principles in a calm manner.”
These three principles are based on major shareholders’ responsible acts towards normalized management, pain sharing between shareholders, creditors, and union based on basic principles of restructuring, and continuous long-term plans for normalized management.
GM thought these were reasonable and it promised that it will submit its plans to normalize GM Korea’s management through its official channel as soon as possible.
South Korean Government and GM principally agreed on FDD between KDB and GM in order to figure out management situation of GM Korea. KDB selected Samil PWC (Price Waterhouse Coopers) as the one that will carry out FDD. Currently GM and Samil PWC are having business conferences regarding FDD. GM promised that it will cooperate with FDD and hoped that FDD will start and finish as soon as possible.
“We believe that it will be better to carry out FDD faster than how it is normally carried out.” said Vice-Prime Minister Kim. “Grounds for deciding on plans are weak without FDD. FDD needs to take place as soon as possible after having enough discussions.”
It is heard that Preisdent Engle and Vice-Minister Ko discussed about proposals requested by GM to revive GM Korea. Previously, GM requested participation of KDB ($465 million (500 billion KRW)) if GM Headquarters’ loan of $2.7 billion is converted into equity, participation of KDB ($465 million) into a new investment worth $2.8 billion for next 10 years, provision of plans as collaterals towards GM Headquarters’ loan of $580 million, and provision of $1.58 billion (1.7 trillion KRW) of incentives towards foreign investment companies to South Korean Government.
Vice-Minister Ko said that while MOSF will conditionally participate in new investment worth $2.8 billion towards GM Korea, which is one of the requests made by GM, it will not participate in conversion of investment worth about $2.7 billion. However, it will not be able to exercise its veto power if KDB does not participate in conversation of investment since its share will fall below 15%.
According to GM Korea’s articles of association, it is regulated that special resolutions are approved if they get at least 85% of agreements from common stocks. Because provision of collaterals is considered as a special resolution, KDB that holds 17% of shares can reject this provision. When KDB’s share fell from 28% to 17% due to recapitalization of GM in October of 2009, it was able to recover its minor equity by changing percentage of agreements from common stocks from 75% to 85%.
GM Korea is planning to hold a board meeting on the 23rd and discuss about holding a temporary general meeting of shareholders regarding establishment of security towards $580 million of loan and extension of debt by GM Headquarters. This indicates that it is going to change its credit loan into secured loan and it intends to collect funds by selling its facilities or plans that are collaterals it is not able to repay its loan. KDB can exercise its veto power at this board time. However, it will not be able to exercise its veto power if its share falls below 15%.
On the other hand, GM Korea’s union held its ‘83rd Temporary Representative Convention’ on the 22nd and presented six requests including withdrawal from closing of plant in Gunsan to GM. It is not going to carry out both general strikes and partial strikes, but it decided to carry out rallies in Bupyeong, Gunsan, and Seoul.
Staff Reporter Ryu, Jongeun | rje312@etnews.com & Staff Reporter Yoo, Seonil | ysi@etnews.com