Action by the Korea Development Bank and seven other banks is easing some of the immediate financial pressure on GM Daewoo Auto and Technology Co., CEO Nick Reilly says.
At an impromptu news conference in Seoul today, Reilly confirms the banks have agreed to roll over half of the funds due on some $900 million in foreign exchange futures for a 3-month period.
Reilly “very enthusiastically thanked KDB for leading the way in getting 50% of the contracts deferred,” a GMDAT spokesman tells Wards. “He said this action will get GM Daewoo through the second quarter.”
The spokesman would not disclose how much of the $900 million GMDAT was liable to pay out to settle the futures contracts.
GMDAT routinely had hedged its pending receipts of foreign currencies generated by overseas sales by signing dollars futures contracts with the KDB and various other banks.
However, this year, the Korean won plunged suddenly against the dollar, and GMDAT was faced with huge payouts when the contracts became due in May and June. GMDAT does not have funds to settle the contracts.
The situation only has been deferred, the spokesman points out, with the contacts now becoming payable in the third quarter.
Reilly also acknowledges reports the KDB may want to increase its 28% holdings in GMDAT, but says there have been no official discussions on the matter.
Reilly said there has been “no formal request from (the) KDB about GM selling some of its (51%) stake in the company,” the spokesman says. “He said the matter can be considered if a formal request is made, but for now there has been no such request.”
The KDB has said parentCorp. must first advance funds or guarantee loans for GMDAT before the KDB will offer more credit, but Reilly says GM cannot possibly come to the Korean auto maker’s aid.
However, he says GMDAT and GM still are negotiating with the KDB and he remains hopeful the state-run bank will provide a credit instrument that will carry the Korean company through 2009.