Dongbu Group to sell affiliates to tide over crisis

South Korean conglomerate Dongbu Group said Sunday it plans to sell two of its affiliates and other assets in a bid to tide over a crisis and improve its financial health.

Dongbu Group said it plans to sell stakes in its electronics unit Dongbu HiTek Co. and Dongbu Metal Co. by 2015, and also have its other affiliates sell assets to secure a combined 3 trillion won ($2.82 billion).

The conglomerate has been making self-rescue efforts under a contract with the state-run Korea Development Bank, the main creditor, since 2003 to improve its financial health.

"We plan to secure 3 trillion won and finish our self-rescue plan by 2015," an official from the group said.

Dongbu Group Chairman Kim Jun-ki also said he will sell shares in the group's affiliates to secure the 100 billion won needed for a capital increase for Dongbu Steel Co.

Dongbu Group said the moves will allow the conglomerate to reduce its debt to 2.9 trillion won from the current 6.3 trillion won and improve its interest coverage ratio from 0.14 to 1.6.

The ratio, or a firm's operating profit divided by its interest costs, measures the company's ability to pay interest on outstanding debt.

A reading higher than 1 means the firm earns more than it has to pay in interest, while a drop in the reading indicates the firm's debt-repayment ability has deteriorated.

Other Dongbu Group's affiliates will also make efforts to improve their financial health, with Dongbu Hannong Co., an agricultural affiliate, selling its farmland and Dongbu Corp., a construction arm, offloading shares in sister companies. (Yonhap News)