General Motors Corp. wants creditors of Daewoo Motor Co. to swap loans for equity if the US giant acquires the troubled South Korean company, a senior GM official has said.
Alan G. Perriton, executive-in-charge of Alliances and Partnerships for GM Asia Pacific, said here late Monday that GM would like to have the creditors “convert some of the outstanding debt for equity.”
Perriton, on a visit to Seoul for the Korea Import Motor Show, said creditors could get some of their money back upfront and recover more over time by owning equity and sharing in profits.
“So our anticipation is first, conversion of some debt for equity, and then, for the longer term, share in the profits generated from the company to help recover their (the creditors’) original debt position,” Allen said.
The proportion of debt to be converted and the swap ratio would be subject to negotiation between GM, the creditors and Daewoo, he said.
GM, whose technology and strategic tie ups with Daewoo date back three decades, is seen here as the favourite to acquire the ailing automaker.
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GM, Fiat, Ford Motor Co., Hyundai and DaimlerChrysler have all completed or are carrying out due diligence examinations of Daewoo Motor ahead of the announcement of a preferential negotiator in June.
GM has indicated it is not prepared to offer more than Ford for Daewoo. Ford has reportedly offered around seven billion dollars.
Daewoo Motor is lumbered with about 8.6 trillion won (7.6 billion dollars) in debt against 12.9 trillion won (11.6 billion dollars) in assets.
The Daewoo Group collapsed last year under the weight of 77 billion dollars in debt.
Asked to comment on GM’s intentions towards Daewoo’s suppliers, Perriton said GM “understands very clearly” the suppliers are “in fact quite competitive and in many instances very competitive.”
If the takeover went ahead, the suppliers could help support GM’s global production volume of some nine million units a year, which would provide the suppliers with “fabulous opportunities” to grow, he said.
As to the possibility of GM joining with Fiat to bid for Daewoo, Perriton said: “At this point, we have no intention other than to proceed with an independent approach to this proposal.”
GM “basically” plans to keep Daewoo “largely intact,” he said, indicating GM would retain Daewoo’s operations and its brand.