In response to several news media reports that the decision by Hyundai creditor banks to provide additional liquidity support to Hyundai Electronics Industries Co. (HEI), Hyundai Engineering and Construction Co. (HEC), and other Hyundai subsidiaries amounted to the granting of special favors to the Hyundai Group, the FSS verified the following issues with the creditor banks:

1. Financial Support to HEI and Progress of Self-Rescue Plan

Under a mutual agreement, the financial support to be provided by the creditor banks to HEI can be divided into loans under credit lines, ordinary loans and credit access, and syndicated loans.

During a series of meeting held between late-November 2000 and mid-March 2001, the creditor banks agreed to restore HEI’s credit lines up to previous limits. For ordinary loans and credit access, the creditor banks sought to resolve the liquidity shortages experienced by HEI through extension of debt maturity.

However, due to protracted disagreements among several creditor banks over their share of liquidity support, the creditor banks convened an emergency meeting on March 10th in order to resolve their differences and strike a new agreement concerning the portion of liquidity support to be provided by each creditor bank.

With regard to the syndicated loan that was lead-managed by Citibank and announced on November 28, 2000, it should be noted that only KRW 800 billion of the original target of KRW 1 trillion was successfully raised due to the non-participation of several creditor banks. The decision to proceed with raising the remaining KRW 200 billion is entirely up to Citibank as the lead manager of the syndicated loan. The FSS neither participated in the March 10th creditor bank meeting nor engaged in any discussions in regard to the meeting.

Meanwhile, the decision by creditor banks to provide liquidity support to HEI was made on the strict condition that it would fully execute the self-rehabilitation plan announced by the Hyundai Group in January 2001. The self-rehabilitation plan includes, inter alia, disposition of properties, marketable securities and other assets valued at KRW 1.374 trillion. As of February 2001, HEI had disposed of assets worth KRW 19.1 billion.

2. Financial Support to HEC and Progress of Self-Rescue Plan

Between October 2000 and March 2001, creditor banks to the Hyundai Group decided to provide US$400 million worth of payment guarantees to Hyundai Engineering & Construction (HEC) in order to enable the company to complete its ongoing overseas projects. However, the support measures were not implemented due to disagreements among several creditor banks regarding their portion of contributions to the payment guarantees. At the March 10th meeting called by Hyundai main creditor, the creditor banks were able to finalize each bank’s respective share of the payment guarantee.

The creditor banks thus re-affirmed their previous commitment to the US$400 million payment guarantee at the meeting to help HEC borrow overseas and complete their projects. In addition, the Korea Development Bank and Korea Exchange Bank will each provide a US$100 million bridge loan to HEC until the company can locate an overseas lender for the US$400 million.

It should also be noted that the decision of financial support by the creditor banks was made on condition that HEC agree to be subject to self-rescue plans, due diligence, management replacement, capital dilution of major shareholders, and debt-to-equity swaps.

The progress of the self-rescue plan by HEC shows that, as of the end of 2000, total fund-raising stood at KRW 1,289.2 billion, or about 84% of the original KRW 1,545.5 billion target. The target for 2001 is KRW748.5 billion, of which KRW38.4 billion has already been raised as of the end of February.

3. Additional Syndicated Loan Worth KRW200 Billion from Citibank

HEI selected Citibank as its financial advisor and sought to arrange KRW1 trillion in won-denominated syndicated loans in order to improve its capital base. Due to the non-participation of several banks, however, HEI was able to raise only KRW800 billion. The decision to raise the remaining KRW200 billion is entirely up to Citibank, as the lead manager of the syndicated loan.

4. Kumkang Mountain Tour Business of Hyundai Asan Corporation

The FSS is not aware of any additional financial support for Hyundai Asan Corporation by financial companies. Any financial support for Hyundai Asan Corporation is a matter to be decided by the concerned individual financial institutions.

5. Ceiling on Export Financing on D/A Basis for HEI

The ceiling on export financing on documents against acceptance (D/A) basis for Hyundai Electronics Industries (HEI) was set at US$1,456 million as of the end of 1999. However, the ceiling was essentially lowered to US$ 810 million as of end 2000 as several creditor banks reduced their respective ceilings, which led to liquidity shortages and difficulties with export activities at HEI. The creditor banks convened a meeting on January 9, 2001 and agreed to increase the ceiling on D/A-based export financing to HEI by US$600 million in order to restore the previous ceiling of US$1,400 million.

However, liquidity problems at HEI did not abate as several creditor banks did not comply with the agreement. To resolve this situation, the creditor banks met again on March 10 and agreed to return to the previous credit ceiling for HEI. The creditor banks also adjusted and finalized the relative portion of credit access to be assumed by each of the creditor banks.

6. Plan for Issuing Depository Receipts

The plan for issuing depository receipts (DR) worth a total US$ 1 billion overseas by HEI is part of HEI’s overall self-rescue plan, which has been in progress since last year and led by its financial advisor, Salomon Smith Barney, a unit of Citigroup.

* Please refer to the attache file for details.