The South Korean government is holding talks in the United States on ways to reschedule $92 billion worth of short-term debt, and help the country's ailing economy.

The high-level negotiating team, which arrived in the US on Monday, is expected to meet US Treasury Department and IMF officials in Washington on Tuesday and then on to discussions with officials from leading international banks on Wednesday to discuss rolling over South Korea's banking debt.

The Wall Street Journal reported on Monday that the US financial institution, J.P Morgan, was proposing to convert $9 million of Korean debt into government bonds, while another $6 million in loans would be guaranteed by the South Korean government.

European banks roll over debt

On Monday, a group of major UK lenders announced that they were rolling over their short-term loans until the end of March.

The banks are: Barclays, Lloyds, National Westminster, the Royal Bank of Scotland, Standard Chartered and HSBC, which owns Midland bank in the UK as well as Hong Kong Bank.

HSBC, the co-ordinator for the banks lending to South Korea, said in a statement: "The aim is to contribute to the international effort aimed at restoring the Republic of Korea's position in the international markets and easing its ability, and that of the Korean banks, to manage short-term liabilities."

Last week, German banks agreed to roll over South Korean short-term debt owed in January, February and March to March 31 and French banks reached a similar decision earlier this month, delaying repayments until March 31.

More bankruptcies ahead

Ernest Napier of the leading credit-rating agency, Standard and Poor's, says that the short-term prospects for South Korean banks remain "extremely difficult".

According to Mr Napier, pressure on the South Korean currency, the won, and rising unemployment would lead to additional corporate bankruptcies, and create further problems for the banks.

He said the sooner South Korea could reach agreement with international lenders, the less pressure there would be on the banks.
 

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