The incestuous financial crises of Korea's major conglomerates never seem to change. Now, once again, it's cash strains at the Hyundai Group, after an earlier financial brush fire at the same chaebol was supposedly put out in the spring.
And, once again, Korean banks and creditors, propped up by the government, are being called on to perform a bailout, this time involving Hyundai Engineering and Construction. Also, Hyundai Electronics Co. Ltd. again finds itself caught in the middle. The Korean government is demanding that Hyundai affiliate companies, including the electronics arm, pitch in to help the troubled construction unit.
A dozen Korean banks last week agreed to roll over $200 million in maturing Hyundai Engineering and Construction loans that couldn't be paid. The latest rescue comes only two months after banks helped the Hyundai affiliate out of a cash crunch by increasing its overdraft ceilings. It also comes only months after the banks pulled another unit, Hyundai Securities, out of financial collapse.
The latest financial fast footwork has a new wrinkle: Two of the affiliates-Hyundai Electronics and Hyundai Heavy Industries-are preparing to sue each other over repayment of debt. Hyundai Heavy is predominantly owned by the troubled Hyundai Engineering and Construction.
The sibling spat results from a 1997 deal by Hyundai Electronics to raise funds by selling $175 million in the Hyundai Investment Trust. In July, Hyundai Heavy bought back for $220 million the stock that Hyundai Electronics had sold, but claims the electronics unit agreed to reimburse it under a repayment guarantee. Hyundai Electronics counters that it made no such promise.
While the Hyundai Group is enmeshed in financial jockeying, efforts to restructure it are in disarray. Announced plans to set up Hyundai Motors as an independent company have been put on hold. Various sons of Hyundai Group founder and godfather Ju-yung Chung are battling over control of the parent group as well as subsidiaries.
Amid all the turmoil, Hyundai Electronics last week came up with good news: It struck a major chip purchasing deal to supply LG Electronics and cooperate on the joint development of future ICs for consumer electronic and IT products. Hyundai took over LG Semicon Co. Ltd. in a 1999 shotgun marriage forced by the Korean government. The piqued OEM arm of LG initially went to Japanese and other foreign chip sources, but in a growing detente between the rival chaebol, has now made Hyundai's microelectronics division its major chip supplier.
And that's the news this week from Lake Woebegong.