Daewoo Averts Bankruptcy with Asset Pledge but Faces Uncertain Future

Daewoo, South Korea's second-largest conglomerate, narrowly escaped bankruptcy after it pledged Won10,130bn (£5.49bn) of assets as collateral to persuade creditors to roll over short-term loans. This move highlights the fragile state of Korea's economic recovery, which is still reeling from the effects of a national financial crisis in late 1997. Daewoo's problems stem from the large debts it accumulated in the early 1990s to finance industrial expansion, which led to severe cash flow problems and loss of confidence in the company's restructuring efforts.

Key Takeaways:

Daewoo pledged Won10,130bn (£5.49bn) of assets as collateral to prevent bankruptcy, highlighting the company's severe cash flow problems.
The Financial Supervisory Commission warned that Daewoo will inevitably go bankrupt if creditors lose confidence in its restructuring plans.
Daewoo's founder and chairman, Kim Woo-choong, pledged Won1,250bn of his personal assets as collateral to gain a reprieve on credit.
The company agreed to allow creditors to dispose of the pledged assets if restructuring plans are not implemented in time.
Daewoo Motor's chairman, Kim Woo-choong, has pledged to resign after completing reforms at the car division.
The rescheduling of Daewoo's short-term debt of Won7,000bn over six months will give the company time to sell assets and raise capital to pay medium and long-term debt.

Statistics:

Won10,130bn (£5.49bn): the amount of assets pledged by Daewoo as collateral to prevent bankruptcy.
Won1,250bn: the amount of personal assets pledged by Kim Woo-choong as collateral to gain a reprieve on credit.
Won7,000bn: the amount of Daewoo's short-term debt rescheduled over six months.
June: the month in which the Financial Supervisory Commission warned that Daewoo will inevitably go bankrupt if creditors lose confidence in its restructuring plans (note: no specific date mentioned, but Financial Supervisory Commission mentioned as source).

Sources:

Daewoo
Financial Supervisory Commission