Talks Underway on R&D Unit Spin-off
The Korea Development Bank (KDB) will invest US$375 million in GM Korea on Dec. 26 to fulfill its promise to invest a total of US$750 million in the ailing company to normalize its operations. The KDB invested half of the promised US$750 million in June.
GM Korea announced on Dec. 13, that it decided to increase capital through third-party allotment for the purpose of raising 404.5 billion won (US$375 million) in facility funds.
The KDB, the second largest shareholder of GM Korea, will receive 11,906,881 preferred shares of GM Korea for investing an additional US$375 million.
The KDB agreed to invest US$750 million in GM Korea on the condition that GM Korea stays in Korea for at least 10 years. For its part, GM promised to turn its US$2.7 billion in loans to GM Korea into capital and invest US$3.6 billion in fresh funds in the automaker.
When the KDB executes the remaining half of its promised investment on Dec. 26, its support for GM Korea will be completed.
However, there is an issue that needs to be resolved in advance. The KDB and GM Korea need to reach an accord on the proposed separation of an R&D unit from GM Korea.
"We are negotiating under the principle of protecting our rights as a shareholder and guaranteeing the sustainability of GM Korea," the KDB said on Dec. 12. “We received materials including a business plan from GM and a consulting firm is now going over them.”
“It is on Dec. 26 that we have to wrap up an additional investment according to the agreement,” a KDB representative said. “The additional support will be wrapped up only after negotiations on the separation of an R&D unit from GM Korea currently under discussion are completed.”