As the liquidity of Dongbu Group, a South Korean conglomerate providing steel, insurance and electronics goods, is worsening, creditors have put an ultimatum on the debt-saddled conglomerate to swiftly sell some business units amid a liquidity crisis.

Despite a series of warnings in the market, Dongbu chairman Kim Jun-ki has continued to argue since last year that its financial status was not as critical as those of the embattled STX and Tong Yang groups, most of whose units are in the debt-rescheduling process.

As a compromise with creditors, Dongbu also promised in November 2013 to push for the sale of some units in its unveiling of a road map to improve its cash flow problems. But the group has yet to carry out detailed procedures for the bidding.

An official at the main creditor Korea Development Bank was quoted by an online news provider as saying that “chairman Kim is excessively obsessed with his management rights.”

The official also reportedly said that “belated action from the group management could contribute to a worse liquidity crisis and failure in finding acquirers for core units.”

In addition, financial regulators have embarked on measures to prevent STX or Tong Yang-like woes. The Financial Supervisory Service has recently urged some Dongbu executives to implement the normalization plan as soon as possible.

An FSS official said the nation’s financial watchdog also held a meeting on April 3 to discuss the Dongbu issue with the state-controlled Korea Development Bank and the Financial Services Commission.

Meanwhile, Nice Rating downgraded the credit scores of three Dongbu units including Dongbu Metal on Thursday.

Last November, the conglomerate vowed to sell off Dongbu HiTek, a highly profitable semiconductor specialist, along with Dongbu Metal and the Incheon Steel Mill of Dongbu Steel.

Some market insiders say that the conglomerate’s self-rescue plan is considered to be the only plan to save its symbolic steel business.

Dongbu Steel, which has seen a continuous operating deficit, earlier said that the cold-rolled steel sector would play a key role in supporting the company in the coming years.

By Kim Yon-se (kys@heraldcorp.com)