Talks between international banks and Daewoo Corp. in Hong Kong on $6.7 billion of debts hit a stalemate Thursday, raising the likelihood the South Korean conglomerate will be forced into bankruptcy.

Banking sources said that there appeared to be little chance banks would accept the 63.5% writedown the South Korean government has proposed instead of the 45% banks have reportedly said they are prepared to accept.

"The Korean government is playing hardball," said a banking source in New York. "And foreign creditors are saying that they don't have to accept anything and will shut down Daewoo and attach the assets."

Daewoo, one of South Korea's largest manufacturing conglomerates, expanded rapidly into the United States and other foreign markets during the last decade. It has a combined $78 billion of debt held by local and foreign banks and accounts for about 10% of South Korea's gross domestic product. A bankruptcy would be a major blow to the country's economy as it struggles to recover from a devastating two-year-old economic crisis.

Chase Manhattan Corp., London-based HSBC Holdings PLC, and Bank of Tokyo-Mitsubishi Ltd. are co-chairmen of discussions between the South Korean government and nearly 200 foreign banks with exposure to Daewoo. Chase, Citigroup Inc., Dai-Ichi Kangyo Bank Ltd., National Australia Bank, Arab Bank PLC, and ABN Amro Holding are among the major lenders to the industrial group.

"It's a total stalemate," said Gary Kleiman, president of Kleiman International Inc., a Washington-based global financial consultant.

Chase has already written off most of its exposure to Daewoo, taking a $287 million charge in the fourth quarter that was attributed to "a single large Asian credit." Honolulu-based Pacific Century Financial Corp. also wrote off $19.5 million of loans to a "South Korean conglomerate" and put another $10.7 million on nonperforming status in the fourth quarter.

Banking sources said a key sticking point has been that the South Korean government does not want to appear to be more generous to foreign creditors than it has been to domestic ones, who have largely accepted 35 cents on the dollar for Daewoo bonds and loans they hold. Talks have been further complicated since South Korean creditors took control of 12 Daewoo subsidiaries and have begun separate talks with foreign banks over unpaid loans.

"Money was shifted around in intercompany transfers without even an I.O.U., and assets went out the back door with no accounting," said the New York banking source. "It's a real cauldron."

Sources added that in the event South Korea follows through on a threat to put Daewoo into bankruptcy, banks would move quickly to seize the group's international holdings, making any settlement even more unlikely and blocking any effort by General Motors Corp. or Ford Motor Co. to buy Daewoo Motor Co.

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