Daewoo faces foreign debt crisis

But will the PC company's recent massive wins come to the rescue?

Stricken industrial giant Daewoo has been knocked back by creditors after asking them to agree to a six month moratorium, which would have given it a much needed break from its crippling debt repayments. It had offered collateral, in the form of shares in the company, in return for the payment break, but this was rejected over the weekend. The group's foreign debt adds up to more than $5 billion and, according to The Korea Herald, Daewoo's foreign creditors have demanded that either the Korean government, or Korean banks, underwrite the debt. The conglomerate is committed to repaying $3 billion by the end of the year. Despite the seemingly unending series of financial hurdles the Daewoo group has to get over, its PC subsidiary is one division that looks like it may have a viable future. In recent months it has secured two huge PC supply contracts – one of which was the largest Korean PC export deal. The first was in August and saw Daewoo sell 1.4 million PCs – at a value of $700 million. But this was topped this month when Daewoo won a contract to supply $840 million worth of PCs (1.92 million units in all) to US retail chain Enpointe. Daewoo is said to considering setting up a joint venture with Enpointe to capitalise upon recent success in the US market. With sales to the US market alone at over $1.5 billion after just two deals, the PC company could be in a position to turn the corner for Daewoo. Winning deals of this magnitude can only be done by the group using its massive purchasing power to squeeze its margins to a point many manufacturers simply could follow. But with only a modest increase in price per unit, the Daewoo PC company could realise significant increases in revenue. ®

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