Korea Exchange Bank and other Hyundai creditors approved the group's plan to sell a 6.1 percent stake in Hyundai Motor Co. held by the founder and to use the proceeds to ease cash-flow problems at the construction unit.
The plan effectively ends a two-month standoff between the government and Hyundai founder Chung Ju Yung and helps bail out Hyundai Engineering & Construction Co.
The unit, Korea's biggest contractor, owes 5.4 trillion won and has been struggling to pay its debts since May, sparking concern about the future of both the group and the Korean economy.
"The creditors were optimistic about Hyundai Group's self-rescue plan because it included steps that could be taken immediately,'' said Lee Tae Kyun, an official overseeing Hyundai's debts at KEB. Hyundai Engineering, Hyundai Marine & Fire Insurance Co. and other shares of Hyundai companies soared on the news of Hyundai's 1.52 trillion won ($1.36 billion) debt restructuring plan.
Hyundai Engineering and Hyundai Marine jumped to their 15 percent limit as soon as the market opened. Hyundai Corp. rose as much as 13.5 percent.
"Investors are happy with the Hyundai announcements to start off with,'' said Park Jae Hoon, a strategist at Tong Yang Securities Co. in Seoul. They "are betting the solution to solve Hyundai's cash problems is more than enough to give a boost to the market.''
Hyundai's plan - the second presented in five weeks - comes as Korea's largest industrial group tries to restore investor confidence in its 28 companies. Hyundai Engineering shares had fallen by more than 50 percent before the announcement of the plan.
In their meeting yesterday, creditors reaffirmed their decision to roll over Hyundai Engineering's debts and plan to send a letter to local ratings agencies, asking them to consider raising Hyundai Engineering's ratings, which were lowered to below investment grade, Lee said.
Kim Kyung Lim, president of main creditor KEB, said yesterday that with this plan, "Hyundai Engineering could start paying some of its debt by as early as October. Until September, the creditors will continue rolling over its debt.''
Hyundai creditors will pay about 216 billion won for the Hyundai Motor stake, or 12.7 million shares, at 17,000 won per share, this month, Kim Jae Soo, head of Hyundai Group's corporate restructuring committee, said yesterday. Hyundai Motor shares, which closed at 17,150 won on Friday, rose as much as 7.8 percent yesterday morning to 18,500 won.
Creditors plan to sell the motor stake by Dec. 22 to a third party. KEB said proceeds would be used to buy three-year corporate bonds in Hyundai Engineering, whose shares rose to 3,335 won in early trading yesterday. Reuters
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