Hyundai E&C $4.8 billion sale at risk on funding plan

SEOUL Thu Nov 25, 2010 11:24pm EST

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SEOUL (Reuters) - The $4.8 billion sale of a stake in Hyundai Engineering & Construction Co Ltd (000720.KS) may be at risk as top shareholders delay signing a deal while awaiting clarification on funding plans from Hyundai Group.

Shipping-focused underdog Hyundai Group was unexpectedly picked as preferred bidder for the 35 percent stake on November 16, beating out rival Hyundai Motor Group.

Hyundai Group offered about 5.5 trillion won ($4.8 billion) -- more than double the current market value of the country's top contractor -- but has failed to sign a preliminary agreement with creditors-turned-shareholders ahead of the November 29 deadline.

The major shareholders of Hyundai E&C requested additional information on Hyundai Group's financing plans, which involve a 1.2 trillion won loan from France's Natixis SA (CNAT.PA), amid market speculation that Hyundai Group might have offered group shares as collateral.

"We want additional information on the financing, including the lending agreement between Hyundai and Natixis," said a spokesman for Korea Exchange Bank 004940.KS, a major E&C shareholder.

Hyundai Group has said the French investment bank extended the loan without collateral and the deposit was legitimate, a source close to the matter said.

Hyundai Group said on Friday that demands for further verification at the preliminary deal stage violated bidding rules, and urged Hyundai E&C's top shareholders to sign the deal by the Monday deadline.

"We are waiting for Hyundai Group to submit the documents. We will decide (whether to sign a deal) after reviewing the documents," Korea Finance Corp President Ryu Jae-han told Reuters on Friday.

Hyundai Group has also demanded that shareholders withdraw their nomination of Hyundai Motor Group as reserve bidder, arguing that the auto-focused group had leaked confidential bidding information and spread false rumors.

The dispute is the latest twist in an acrimonious battle between the conglomerate and Hyundai Motor Group after the original Hyundai group was torn apart by family infighting.

Hyundai Motor Group, the world's fifth-largest automaker, lost out to Hyundai Group after a 5.1 trillion won offer. It has refrained from publicly responding to its rival's criticisms.

But the group had asked questions about sale process to creditors via advisor Goldman Sachs (GS.N), a source close to the matter told Reuters.

(Reporting by Hyunjoo Jin; Editing by Chris Lewis)

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