Chung Away as Hyundai Unit Sinks

After Dong Ah Construction was nearly taken off life support systems on Tuesday, Hyundai Engineering and Construction has managed to stave off the spectre of bankruptcy.

These narrow escapes notwithstanding, it appears that the liquidation of ailing companies will proceed. In this process, side effects are inevitable; the ranks of the unemployed will rise and subcontractors will go under. If we continue this way, all of us will face an uncertain financial future. That is why we believe insolvent companies without any hope of recovery should be shut down.

We would like to ask the government and creditor banks whether they intend to leave Hyundai Engineering and Construction as it is. Even a child could see that despite the fact it fended off bankruptcy on Monday, the company''s future is rockier than ever. Since its crisis came to the fore in May, none of its problems have been satisfactorily addressed. The company has submitted rescue packages as many as four times, but they have not been implemented and creditors have invited mockery from commentators dubbing them ?yundai''s private cash cow.''

The government aggravated the situation when it toyed with the idea of allowing debt-to-equity swaps for Hyundai Engineering and Construction. We suspect that the government does not have either the basic documentation on the company''s debt structure and business prospects or the ability to make a judgment based on such facts, as the discussion is still limited to whether or not to let Hyundai Engineering and Construction survive － a question first raised in the spring.

Hyundai Engineering and Construction does not seem to have much time left. If the market cannot tolerate the existence of the company under the current conditions, the government and creditors must make a decision. If it is desirable to let Hyundai Engineering and Construction survive as part of overall industrial policy, or the company is expected to yield 800 billion won in business profits this year as creditors forecast, the government must attempt to ensure the company''s survival through debt-to-equity swaps or debt write-offs.

If the company does not fit into these two categories, steps should be taken toward court receivership or liquidation without fear of side effects, such as a blow to the company''s image or massive layoffs. With regard to the settlement of overseas financing, corporate bonds and commercial papers, sufficient preparations should be made, tapping the experience gained in the process of dismantling the Daewoo Group.

At the same time, we urge Hyundai Engineering and Construction owner Chung Mong-hun to return to Korea as soon as possible. It is Mr. Chung who is most responsible for the future of the company. His agreement is essential for a viable rescue package, which require a donation from his private assets, or a revival plan involving debt-to-equity swaps. However, Mr. Chung has now been abroad for almost a month. Although his overseas stay is said to be for the purpose of attracting foreign capital, his proposed deadline of Tuesday for the rescue of Hyundai Investment Trust Company has already come and gone.

The most important factor in the current Korean economic situation is the Hyundai Group, which is under Mr. Chung''s control. His lengthy overseas stay might appear to be an attempt to shirk his responsibilities. He should bear this in mind and return to Korea as quickly as possible to demonstrate that he is making efforts to solve a problem of his own making.

by Sonu Sok-ho