South Korea's 12th largest conglomerate collapsed on Saturday in what was seen as the first of a series of major bankruptcies expected under strict economic supervision by the International Monetary Fund.
Halla group, best known for its shipbuilding and auto parts manufacturing, was declared bankrupt on Saturday after defaulting on $220 million in maturing debts over the past two days, creditor banks said.
It was the first chaebol, or conglomerate, to collapse under the strict conditions that the IMF attached to its record $60 billion bailout package for South Korea's floundering economy.
The prescriptions called for slower economic growth, tightened credit control and higher interest rates raised the prospect of mass layoffs, labor protests and more bankruptcies, especially among South Korea's bloated, debt-ridden conglomerates.
"Halla could obtain no more funds because banks refused to provide new loans and began calling in the loans they had already provided," said Park Sung-suk, vice chairman of Halla group.
Later on Saturday, Halla filed for court receivership for its flagship Halla Engineering and Heavy Industries Co., South Korea's third-largest shipyard.
Halla sought a court-sanctioned mediation for Mando, the nation's no. 1 auto parts maker, in which it will be allowed to discuss rescheduling debt payments. Mando is a key supplier to Hyundai and other car makers, which were already reeling under sharp declines in domestic auto sales.
Halla's 16 subsidiaries generated $5.3 billion in sales and $23 million in net profits last year. But its debts totaled $6.4 billion, or 20 times the total value of its equity.
Halla began building a multibillion dollar shipyard in 1992 with loans. But the rapid expansion by South Korean shipyards helped cause global overcapacity, triggering ruthless price wars. Halla shipyard posted $47 billion in losses last year. It kept borrowing to service its debts.
