Customs clearance for Daewoo sale

The last hurdle for the sale of bankrupt Daewoo Motor India's assembly plant to General Motors (GM) has been removed with the customs department agreeing to tone down its Rs 1,600 crore claim on the defunct company.

Lenders to Daewoo India have negotiated a compromise with the customs department, whereby the proceeds of the sale would be shared in proportion to their claims on the failed Korean company, sources said.

The customs department has agreed to this arrangement, in principle, and is waiting for the formal clearance from the government.

In addition to the customs department's claim, ICICI Bank, IDBI Bank, Exim Bank and a few other lenders have an aggregate claim of Rs 2,500 crore on Daewoo Motor India.

Earlier, both the lenders and customs department were claiming the first charge on the assets of Daewoo India. The sale of the plant at Surajpur to General Motors will go ahead, with the customs department agreeing to abandon their earlier claim of first right on Daewoo assets, the sources said.

"The sale of the Daewoo plant will fetch a maximum of Rs 800 crore and this amount will be shared between customs and the lenders on a proportionate basis," the sources added.

GM had set a deadline of June 30 for the lenders to resolve the issues hindering the acquisition of Daewoo assets, as the long drawn out battle between customs department and the lenders over the claims had already delayed the company's entry into the small car category by a year. It plans to make its small car Chevrolet Spark at the Surajpur care assembly plant.

The sources said the deadline is now meaningless as GM is going ahead with the acquisition. GM had acquired the global operations of Daewoo Motor in 2000, but the Indian unit was left out of the deal. GM India is willing to buy the Daewoo assets only if they are free from encumbrances.

The Debt Recovery Tribunal, Mumbai had in March 2005 put Daewoo assets in the Surajpur industrial area on sale and fixed a reserve price of Rs 1,103.09 crore. Bankers said the Daewoo assets would not fetch the reserve price. The lenders will be able to recover in the range of Rs 600-800 crore.