Samsung Motor creditors set to agree sale

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The Independent Online

Creditors for the bankrupt Samsung corporation of Korea are today expected to agree the sale of Samsung Motor to Renault of France for a sum of around $540m (£350m).

Approval will be required from at least 75 per cent of Samsung Motor's creditors, many of whom are state-owned banks. The creditors, however, are only likely to recover around 15 per cent of their total loans which are believed to be around 4.3 trillion won (£2.375bn). The deal could also help to quell criticism that the Korean government has dragged its heels on asset sales as the economy recovered faster than expected from near bankruptcy just two years ago.

With the buyout of Samsung, following six weeks of talks, Renault would gain a stronghold in one of Asia's top car markets, which until now has been closed to foreign automakers. It would also allow the French carmaker, which bought 37 per cent of Japan's Nissan Motors last year, to tap South Korea's ability to manufacture local-cost parts, boosting its competitiveness against rivals such as DaimlerChrysler, which have recently expanded in Asia.

"It's interesting since it opens Korea and allows Renault to play production and commercial synergies with Nissan," said Jacques Lemoisson, of CIC-EIFB in Paris. "The investment is judiciously done as the Japanese economy rebounds."

Renault is understood to have increased its offer at the last minute by around $90m, according to reports from South Korea. Renault is offering $100m in cash upfront and a further $200m from future operating earnings.

Renault is also thought likely to assume $200m of debt interest-free for 10 years. The remaining debt held by Samsung creditors, estimated at about $40m, would be swapped for equity in the newly restructured company.

A decision on Renault's offer is likely to occur tomorrow. Talks stalled recently after Renault refused to increase its offer of $450m or take on any debt. Talks resumed when the lenders cut their asking price to $627.5m from more than $900m.

If the deal is approved, Renault will emerge with 70 per cent of the company.

Samsung will retain a stake of 20 per cent, while creditors get about 10 per cent.

Buying Korea's smallest carmaker strengthens Renault's position in Asia. Renault already has light truck and car plants in China, Malaysia and in Taiwan.