A US investment consortium agreed Thursday to invest 815 million dollars in the troubled financial arm of South Korea’s largest conglomerate, the Hyundai Group.
A memorandum of understanding was signed in New York between Hyundai Investment Trust and Securities (HITS) and the consortium involving American International Group, W.L. Ross, and four other US funds.

“This is the biggest single foreign investment in the banking sector since South Korea fell into a financial crisis in late 1997,” HITS spokesman Kim Tae-Sung said.

He said the deal would help the country’s largest investment trust restore market confidence.

“The injection of US capital will play a decisive role in normalizing our operations. Market confidence will be restored over our future if the money begins flowing into us next month,” Kim said.

Hyundai Investment fell into trouble last month when it was excluded from a government rescue package for investment trusts suffering from exposure to the collapse of the Daewoo conglomerate last year.

Its trouble spread to other affiliates of the Hyundai Group, prompting intervention by the government, which has urged the overstretched group to undertake drastic changes.

W.L. Ross chairman Wilbur Ross told CNN television from New York that the deal reflects confidence among US investors at the economic reform drive in South Korea.

“We were extremely impressed by President Kim Dae-Jung in terms of his recent North Korean initiative and his very direct commitment to take personal charge of the economic affairs of the country,” Ross said.

“We believe that makes this the exact right time to make a major commitment into Korea and we believe that other international investors will follow suit.”

Ross said Hyundai Investment’s financial status had improved after a government agency took over its bonds exposed to Daewoo.

“Therefore we know the exact amount of the problem, that has already been reflected in their financial statements and it has been dealt with. There is no Daewoo overhead.”

In return for a bailout by government-controlled banks, the conglomerate unveiled plans to raise 5.9 trillion won by selling assets and shares and by spinning off non-core units.

Ross expressed confidence over Hyundai.

“Hyundai itself understands the need to restructure and to reorganise itself so I think it is a cooperative idea between Hyundai and the government, I don’t think it solely being forced on Hyundai by the government.”