Hyundai Motor may trim offer price for Hyundai E&C on bad debts

South Korean conglomorate Hyundai Motor Group is expected to reduce its offer price by 800 billion won to 4.97 trillion won ($4.47 billion) for a 35 per cent stake in Hyundai Engineering & Construction (Hyundai E&C) as the former has unearthedpotential debt and bad loans during a due diligence process.

The group had created a team in November 2010 to review the acquisition, hiring Goldman Sachs, PricewaterhouseCoopers, HMC Investment Securities, and Kim & Chang.

''The potential debt found ... was more than expected,'' which ''has raised concerns about further problems should (Hyundai Motor) sign the formal contract (to purchase Hyundai E&C),''  South Korea's leading Joong Ang daily, a high-ranking official from the inspection team as saying.

However, Hyundai Motor and the creditors denied reports about the size of reduction sought, adding that the purchase will be based on the memorandum of understanding signed in January.

''Bad debts have been found but we cannot disclose the amount,'' said an official from Hyundai Motor. ''We did suggest an adjustment, but the amount of price reduction we proposed cannot be revealed due to confidential reasons based on the contract,'' he added.

The group will use its own capital to fund the stake acquisition.

The official said the acquisition of Hyundai E&C will go ahead as planned. According to the MoU signed by Hyundai Motor and creditors, the maximum limit for a price adjustment is 3 per cent of the initial bidding price.