Seoul - The South Korean government issued a final ultimatum yesterday that Hyundai Group's flagship construction unit would be declared bankrupt if it failed to come up with a drastic survival package by today.
Jin Nyum, the finance and economy minister, said if the self-rescue plan of Hyundai Engineering and Construction (HEC) turned out to be inadequate, it would be placed under court receivership.
HEC could top the list of dozens of firms expected to be declared non-viable in a mass corporate clear-out to be announced by the authorities today.
Chung Mong-Hun, the chairman of the Hyundai Group, the largest shareholder of HEC, said: "I'll do it as best I can."
Yonhap News Agency and other news reports said HEC would present new plans to raise fresh capital and would be spared from the list, sending HEC's shares rising 175 won (R1,15) to 1 350 won yesterday.
South Korea's composite index rose on hopes of renewed corporate restructuring, closing 1,7 percent higher in heavy trade.
President Kim Dae-Jung had said non-viable firms must be liquidated and Jin said the government would not keep the country's largest construction firm alive for the wrong reasons.
Shin Kook-Hwan, the minister of commerce, industry and energy, insisted the government would not be "swayed by any political considerations" in handling Hyundai. South Korea "will suffer enormously from Hyundai's bankruptcy. But Hyundai must not expect favours. There will be no exception to our rules," he said.
Despite the strong warnings, few analysts expect HEC to be taken over by court receivers.
Hwang Chan, a construction analyst at Dongwon Securities, said a bankruptcy would be a huge negative for the economy, particularly the fragile construction industry. "If HEC goes to the court, nearly half the country's construction firms, including even viable ones, will go bankrupt afterwards," he said.
The company has thousands of subcontractors at home and is engaged in massive construction projects in the Middle East and elsewhere in Asia, as well as in the international project to build nuclear reactors in North Korea and a major tourism project in its northern neighbour.
The firm and its sub-contractors employ about 100 000 people in South Korea alone.
HEC has been pressed to present a wholesale restructuring plan since it narrowly avoided bankruptcy on Tuesday by making last-minute debt repayments of 22,4 billion won. Anxiety is now focused on 3 trillion won due by the end of December.
HEC's rescue plan has been delayed by a battle over how much personal wealth the group's founding family should inject. HEC had promised to raise more than 700 billion won in fresh capital to ride out its credit crisis, a HEC spokesman said.