Quaking In Seoul

Now, the banks are in trouble, too

One by one, South Korea's huge conglomerates keep keeling over. Since January, the Hanbo and Sammi construction and steel chaebol, as these diversified giants are called, have failed under the weight of massive debts. Spirits vendor Jinro and textile giant Dainong are on life support, kept out of bankruptcy only by their creditors. On July 15, the $20 billion Kia Group, which owns Korea's second-biggest auto maker, barely avoided collapse when lenders dismantled it in exchange for a moratorium on debt payments. Kia Chairman Kim Sun Hong was outraged, says one Seoul bank executive. But the group owes $10.7 billion. "We had to do something drastic," the banker says.

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