Hyundai Tries to Catch Up With Change

Shareholders of Hyundai Engineering and Construction have voted to reduce stakes held by minority shareholders to nearly 17 percent as a preliminary step toward a debt-equity swap.

The company passed the plan for the capital write-down at an extraordinary shareholders' meeting Friday despite strong protests from minority shareholders by securing 35 percent of shares with voting rights, including shares the firm's late honorary chairman, Chung Ju-yung, had turned over to creditors.

Also at the meeting, a new board of directors comprising seven members, including the company president, Shim Hyun-young, was formed. As a result of the vote, 24 percent of the stake held by majority shareholders, including Hyundai Asan Corporation's chairman, Chung Mong-hun, have been completely written down, which means Mr. Chung no longer holds management rights of the company.

Hyundai Engineering and Construction creditors plan to swap existing debts of 1.4 trillion won ($1.1 billion) for equity by the middle of next month. In addition, the creditors' group plans to issue fresh shares and purchase convertible bonds to invest 1.5 trillion won in the builder. But analysts strongly protested such plans, saying Hyundai Construction, at best, faces an uncertain future.

If creditors complete their investments by the middle of June, Hyundai Construction would be restarted as a "clean company" with capital of 2.5 trillion won. Its debt ratio would be lowered to 220 percent and the interest coverage rate would be heightened.

by Hwang Sung-gun