Insolvent South Korean confectionery company nears sale

Creditors of South Korea's Haitai Confectionery will arrange 395 billion won ($304.3 million) in loans to sweeten the sale of the insolvent company to a UBS Capital-led group, its main creditor said on Monday. The UBS consortium agreed last month to take over Haitai Confectionery for 480 billion won but have yet to sign a formal contract. Chohung Bank and other creditors drew up plans for financial help last week in an attempt to wrap up the sale of Haitai, which went bankrupt in late 1997 and has since been under court protection. Haitai held almost a quarter of the local confectionery market last year but has failed to shake off financial troubles stemming from soured investments in electronics and construction. "A successful sale of Haitai is very important to creditors as well as to the national economy,"​ said a Chohung bank official, who asked not to be identified."The total financing may change as the acquisition price is expected to go up."​ Chohung is one of several nationalised lenders playing a key role in refinancing and selling struggling firms, many to foreign buyers.Those efforts are part of state-led reforms of the corporate sector seen as vital to ensuring international confidence in South Korea, whose economy is cooling off in line with a global slowdown. Exports have declined and a rise in industrial output has tapered off in recent months, underscoring expectations that economic growth will slow to about four per cent in 2001 from 8.8 per cent last year. Haitai's local creditors plan to provide 165 billion won in seven-year loans, 85 billion won in five-year loans and 40 billion won in short-term financing, the Chohung official said.Foreign banks have also shown interest in providing syndicated loans to Haitai, he said. Haitai Confectionery shares had edged up 1.4 per cent to 360 won at 0253 GMT, while the main KOSPI index lost 0.4 percent.The company is 99 per cent owned by creditors who converted 840 billion won of debt into equity in July 1999.It lost 465.5 billion won in 2000 on sales of 771.2 billion won, weighed down by 1.08 trillion won of debt.