Chung Ju-Yung to sell 6.1% of his stake in Hyundai Motor Company

In a self-rescue attempt to ease the Hyundai Group`s liquidity crunch, former honorary chairman Chung Ju-Yung has decided to sell 6.1% of his Hyundai Motor Company(HMC) stocks to debt holders and use the proceeds to pay off Hyundai`s debt. His stake in the company is now 9.1%. In addition, Hyundai Engineering & Construction has agreed to put up its stakes in Hyundai Merchant Marine and Hyundai Heavy Industries as collateral for exchangeable bonds(EBs) of up to 223 billion won. Hyundai has pledged to further obtain 539 billion won through other sales and secure 1.517 trillion won by the end of the year. Deciding that the proposed self-rescue plan was sound, Hyundai`s main creditor, the Korea Exchange Bank, has decided to accept the group`s pledge.

Hyundai officials involved in the conglomerate`s restructuring and planning division held a press conference on August 13 and revealed Hyundai`s self-rescue plan. With the loss of control of the automobile arm due to the sale of stocks in HMC (Chairman Chung Mong-Hun) and Kia Motors, brothers Chung Mong-Koo and Chung Mong-Hun have declared a "ceasefire". The two have been engaged in a bitter feud since March. With the creditor's acceptance of the self-rescue package, the liquidity crisis at Hyundai Engineering & Construction is likely to be alleviated.

Kim also reiterated the pledge to spin Hyundai Heavy Industries off from the Hyundai Group, but announced that the separation was to take place in June 2002 instead of the end of 2003, approximately a year and half earlier than first proposed. Hyundai Motors expressed its satisfaction with Hyundai`s proposal, but Hyundai Heavy Industries` creditors complained that they had originally requested Hyundai Group to spin the division off by early next year. Hyundai Group pushed the schedule back because it has no intention of spinning off Hyundai Heavy Industries, according to the creditors.

Through the self-rescue package, Hyundai will sell off value-added stocks in Hyundai Engineering & Construction and to issue exchangeable bonds to obtain 623 billion won. It will also sell off its real estate holdings, such as an office building in Kwangwhamun, a downtown business district, and property marked for the construction of apartment buildings in Kimhae, to obtain approximately 139 billion won.

Hyundai has also agreed to sell an office building in China and its foreign investment holdings (96 billion won). The group will also sell unleased commercial building floor spaces and collect overdue proceeds from the Hannam-dong apartment construction project (182 billion won). With about 147 billion won from the Housing Development Trust, Hyundai will amass a total of 1.517 trillion won by year-end and thereby reduce its total debt to 4 trillion won.

As for the plan to offer asset backed securities (ABS) with the Seosan farm as collateral and the sale of a factory in Inchon, the creditors decided it would be impractical and as such, it has been shelved.

The Hyundai official added that Chung Ju-Yung and Chairman Chung Mong-Hun have effectively surrendered their control, and HMC, under the control of Chung Mong-Koo, has not been spun off from the conglomerate and has now gone its own direction. As for the questions of disintegrating non-viable affiliates and family control of the Group, the official avoided answering directly and stated that there were no further plans for management reorganization.