GARMENT FIRM'S MONEY WOES HIT FOREIGN BANKS IN S. KOREA

GARMENT FIRM'S MONEY WOES HIT FOREIGN BANKS IN S. KOREA

Foreign banks held an urgent meeting here Monday to discuss a financial crisis in which they provided huge loans to leading garment maker Nonno Co. without receiving enough collateral to secure the loans.

Financially troubled Nonno and its two affiliated companies filed for receivership March 10 in Seoul district court. The court issued permission to freeze Nonno's assets and liabilities Monday, but had yet to decide on appointing a manager to run the company.Nonno and its affiliates' outstanding credit totaled around US$415 million (320 billion won) as of March 3, of which 98 billion won was provided by 22 foreign banks, according to credit evaluation analysts and Nonno officials.

However, the foreign banks secured collateral for only about 40 percent of their loans and payment guarantees to Nonno companies.

Societe Generale of France topped the list of Nonno's foreign bank creditors with 21.3 billion won, followed by Barclays Bank at 11.0 billion and Standard Chartered Bank with 8.9 billion.

"We are extremely worried about this situation," said Pierre Grandamy, general manager of Banque Nationale de Paris in Seoul. The bank provided 7.7 billion won to Nonno but received collateral far below that value, he said.

Foreign bankers contacted by Knight-Ridder Financial News said the meeting late Monday afternoon was expected to focus on whether the court would appoint a manager to run Nonno and keep it afloat.

Foreign banks are now very wary about future operations in South Korea.

"We've never had problems like this in doing business here for the past 16 years," said BNP's Mr. Grandamy.

"But foreign banks will be very, very cautious in the future (to lend money to South Korean firms). Once our fingers are burnt, we become very cautious," he said.

Another French banker said this situation will "definitely" affect his bank's operations in South Korea.

Faced with severe domestic competition, Nonno has been troubled for the past three years.

Nonno's total sales were estimated to reach about 140 billion won in 1991. However, they still had more than 70 billion won worth of inventories, said Kim Kung Jung, analyst at Daewoo Research Institute.

Analysts said the court is expected to appoint management for Nonno in an effort to avoid serious economic impact from the company's possible collapse.

"Nonno has more than 3,000 (South Korean) subcontractors," Daewoo's Mr. Kim said.