UPDATE: GM Daewoo: No Offer From KDB To Increase Stake In Co

GM Daewoo Auto & Technology Co. hasn't received an offer from Korea Development Bank to buy an additional stake in the South Korean unit of beleaguered General Motors Corp. (GM), a company executive said Friday.

"No such talks have been held with KDB," GM Asia Pacific President Nick Reilly said in a press briefing held in downtown Seoul.

He made the comments in response to local media reports that the state-run bank may buy an additional stake in GM Daewoo to help the cash-strapped company.

KDB is GM Daewoo's second-largest shareholder with a 28% stake. The rest of the South Korean carmaker is owned by GM and GM-affiliated companies.

But Reilly didn't rule out the state bank taking an additional stake in GM Daewoo, saying "if that helps (us) find long-term solutions, we will talk about that with the KDB."

As for a recent report that KDB has sought an additional 30% stake from GM Daewoo, he said, "that is not true."

Reilly also said the currency forward contracts extended by three months by eight South Korean banks, including KDB, are worth about $500 million.

"The remaining 50% of currency forwards (coming due in May-June) will be paid on time...from next week as planned," said Reilly, who is also a GM group vice president.

He said GM Daewoo ran into its liquidity problems due to its heavy dependence on exports and heavy losses from currency hedging contracts that resulted from the "dramatic" appreciation of the won against the dollar.

GM Daewoo said last month that it was carefully managing cash flow, and liquidity could be "critical" in the second quarter without external aid.

In February, GM Daewoo asked KDB to extend fresh loans - which were reportedly worth KRW1 trillion - after it used up a $2 billion credit line.

Even if GM ends up declaring bankruptcy, however, "GM companies in Asia-Pacific region will remain part of the newly-restructured GM," said Reilly.

After posting three straight years of full-year net profit from 2005-2007, GM Daewoo shifted to a net loss of KRW875.69 billion ($663 million) last year from a net profit of KRW540.51 billion a year earlier.

-By Kyong-Ae Choi, Dow Jones Newswires; 822-2198-2236; [e-mail]