KDB to pay GM Korea by the end of the month

The state-run Korea Development Bank (KDB) said Thursday it will complete its injection of $750 million into the Korean unit of General Motors later this month, ending a controversy over GM Korea’s plan to spin off its research unit.

The KDB and GM signed a deal in May on the rescue package for GM Korea.

Under the agreement, the KDB pledged to inject $750 million, while GM agreed to provide $3.6 billion in fresh loans to keep GM Korea afloat.

The condition to the additional investment was that GM would keep its Korean operation open for a minimum of 10 years.

In June, the KDB injected $375 million into GM Korea, but the bank said the remaining half may not be provided amid concerns that the U.S. carmaker may keep only its research facility in Korea and eventually shut down its manufacturing facilities here.

KDB Chairman Lee Dong-gull in October told lawmakers that the remaining investment may not be executed, depending on policy decision.

The KDB’s decision came after GM Korea submitted details of its spin-off plan to the bank, the second-largest shareholder of GM Korea.

The KDB has a 17-percent stake in GM Korea.

The KDB said it will buy about 11.9 million preferred shares of GM Korea for 404.5 billion won ($360 million), or 33,932 won per share.

The transaction will be made on Dec. 26, the KDB said.

The May agreement prohibits GM from selling any stake in GM Korea over the next five years and limits GM’s right to sell shares or assets in GM Korea for 10 years.

Yonhap