Samsung to fork out $2.4b over failed auto business

A South Korean court ruled yesterday that Samsung Group companies and its chairman pay creditors of its failed carmaking business $2.4 billion.

The ruling by Seoul Central District Court is another blow to the conglomerate already being investigated over graft allegations.

The court called for Samsung companies to sell 2.3 million shares in its life insurance unit, part of the collateral Samsung Chairman Lee Kun-hee had given the creditors, and pay 1.6 trillion won ($1.69 billion).

The ruling also said Samsung should pay about 680 billion won ($720 million) in accumulated interest, a court spokesman said by telephone.

Samsung can appeal the ruling. A Samsung Group spokesman declined to comment.

Creditors led by debt guarantor Seoul Guarantee Insurance Co had taken 3.5 million shares in Samsung Life Insurance Co, South Korea's top life insurer, as collateral for debt owed by Samsung Motors. They sold some of the shares but have had difficulty in cashing in the rest.

"The ruling says Samsung has to sell the remaining Samsung Life shares and put up 1.6 trillion won," said court spokesman Choi Ki-young. "If the sale proceeds fall short of the agreed value, Lee Kun-hee has to make up the shortage."

However, a deadline for the payment has not been set, he added.

Samsung had valued unlisted Samsung Life shares at 700,000 won apiece when it provided the collateral, which creditors hoped to cash in via an initial public offering.

But an IPO has been delayed because of a regulatory debate on the life insurers' listing while talks to sell the shares to foreign investors, such as Newbridge Capital and Kohlberg Kravis Roberts & Co, also failed.

Creditors finally filed a lawsuit in December 2005, demanding Chairman Lee and other group firms pay 4.7 trillion won in debt and interest in the largest civil suit filed in the country.

Samsung Motors, which meant to complete Samsung's business portfolio ranging from microchips to container ships, was sold to Renault SA after being put into court receivership in 1999 and subsequently became Renault Samsung Motors.

Samsung Life shares were trading at 739,700 won on the over-the-counter market yesterday afternoon.

In another squabble surrounding South Korea's top business group, an independent prosecutors' team has been investigating Samsung since early January on suspicions that it bribed public officials to squash investigations into its management practices.

Prosecutors have raided the group's Seoul headquarters, offices of key units and even the chairman's residence.

The probe came after Kim Yong-cheol, a former top legal executive at Samsung, said the group had used its subsidiaries to create a slush fund.

Samsung has called the accusations groundless and issued detailed rebuttals of Kim's claims.

Agencies

(China Daily 02/01/2008 page16)