South Korea’s Prime Industrial has emerged as the frontrunner to buy bankrupt Dong-ah Construction Industrial in a deal valued at more than Won600bn ($624m), outbidding five other groups.

Creditors, led by Goldman Sachs and state-run Korea Asset Management Corp (Kamco), have been searching for a buyer to revive Dong-ah through a court receivership programme, as they seek to recoup part of the Won4,053.4bn debt owed by the Korean builder.

Kamco said a consortium led by Prime, a local property developer, had tendered the highest bid, followed by Daeju Construction, another local builder.

Kamco plans to select them as the preferred and the second preferred bidders after getting consent from other creditors. The preferred bidder will sign a preliminary agreement with creditors in September and conduct due diligence on Dong-ah before a final contract is signed in October.

Goldman is the biggest creditor in Dong Ah, with 29.1 per cent of the builder’s total debt. Kamco has 19.6 per cent and Seoul Deposit Guarantee has 8.6 per cent.

Dong-ah has been developing land and building bridges, tunnels, subways and apartments, and is also developing the Great Man-made River in Libya. The company went bankrupt in May 2001 after bad loans soared in the wake of the 1997/98 financial crisis.

Prime has been trying to expand through mergers and acquisitions. Earlier this year, it joined the race for Daewoo Engineering and Construction, but was outbid by Kumho Asiana Group.

A number of Korean construction companies are still up for sale, as creditors are keen to recoup their investments in the revived companies. Hyundai Engineering and Construction, the nation’s top builder, and Ssangyong Engineering and Construction, a former unit of the Ssangyong group, are due to be put on the block later this year.

Goldman Sachs is expected to profit from the Dong-ah sale. The investment bank has made substantial investment gains in South Korea in recent years. It more than doubled its $500m investment in 1999 in Kookmin Bank, the country’s biggest lender. It also made hefty gains from investment in Jinro, the liquor producer, which was sold to Hite, the country’s top beer maker, for $3.4bn in July 2005.

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