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Monday, Feb 25, 2002

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Daewoo gives reprieve to Indian subsidiary

Anand Krishnamoorthy

NEW DELHI, Feb. 24

FINANCIAL help seems to be pouring in for beleaguered carmaker Daewoo Motors India Ltd with its parent Daewoo Corp, too allowing the company to defer payment of interest on some loans it had lent, company sources said.

About half-a-dozen Indian banks and financial institutions had recently put a similar moratorium on seeking payment of interest and principal on loans borrowed by DMIL. These lenders include ICICI Ltd and State Bank of India.

"The parent has also decided to grant us some assistance by not asking for the repayment of some loans. It has also waived certain loan repayment," the source said, requesting anonymity. The officials, however, did not disclose how much loans and interest has been waived off.

Indian banks and financial institutions had recently assured that until a final agreement is reached between General Motors Corp and Daewoo Motor Corp, regarding the takeover of the Korean company, they will not press for repayment.

A final agreement between General Motors and Daewoo in this long-standing takeover drama is expected by April, according to sources at General Motors. Sources in Daewoo pointed out that the waiver of loans as well as moratorium on seeking payment is likely to have a further positive impact on the financial of the company.

In fact, losses of DMIL in October-December at Rs 85.74 crore are lower than the Rs 114.81 crore losses suffered in the same quarter a year earlier.

The waiver of some loans and deferment of payment in the case of these loans by Daewoo Corp comes after a prolonged battle between DMIL and the Foreign Investment Promotion Board.

DMIL had sought the permission of the FIPB to convert loans extended by Daewoo Corp into equity in the company. Currently, Daewoo Corp holds 91.6 per cent equity stake in DMIL, which makes the Matiz small car and the Cielo and Nexia sedans.

If the loans were to be converted into equity, the equity stake of the Korean Chaebol would have extended to nearly 93 per cent.

However, this proposal was shot down by the FIPB.

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