SEOUL: A consortium of Hyundai Motor units sealed a preliminary contract yesterday to acquire Hanbo Iron and Steel, a bankrupt South Korean steel maker up for sale for seven years, officials said.
A memorandum of understanding was signed between Hanbo's creditors and the consortium of INI Steel and Hyundai Hysco, lead manager Samil PriceWaterhouseCoopers said.
Hanbo went bankrupt in 1997 under debt of more than six trillion won (US$5.2bil), sparking a massive loan scandal that was partly responsible for South Korea's financial crisis.
Samsung Securities analyst Kim Hag-Ju said Hyundai Motor may have to shoulder some costs for its two steel-making units to take over Hanbo, which has estimated annual steel production capacity of 11.5 million tonnes.
The consortium had a combined cashflow of only about 205 billion won, well below the two trillion won needed to finance the acquisition and future investment in Hanbo, Kim said.
The rise in steel capacity through the acquisition of Hanbo may also result in a supply glut, which could pose an investment risk for Hyundai Motor, he added. – AFP
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