Daewoo's debt-fueled empire collapsed in 1999 when creditors put 12 units into workout

Daewoo was Korea's number-two chaebol: 40 domestic units and 396 overseas affiliates by late 1998, ranked 18th in the Fortune 500 in July 1998. Founder Kim Woo-choong ran it on one idea — grow first, worry about profit later — financed by ever-larger borrowing. When the Asian financial crisis hit in 1997, Daewoo's answer was more growth, not less.

By 1999 the arithmetic broke: the debt ratio passed 400% in March, commercial paper funding froze in late 1998, and a self-rescue plan in July — pledging stocks and real estate worth 10.13 trillion won — failed to persuade the market. On 19 July 1999 the government announced emergency measures; on 26 August creditors voted 12 core companies (Daewoo, Daewoo Heavy Industries, Daewoo Motors and others) into workout; on 1 November Kim and 14 unit presidents resigned together.

Final due diligence counted 88.99 trillion won of liabilities across the twelve workout units. Member companies were sold off or liquidated — Daewoo Motors eventually went to GM — and the Daewoo name faded from the market. Kim fled abroad in 2000, returned in 2005, and was sentenced for fraud involving some 40 trillion won in fake accounts.

The 'Daewoo cannot die' myth collapsed: due diligence found 88.99 trillion won of liabilities in its 12 core units, and the chaebol was dismantled

Borrowing in a crisis is the mirror strategy: healthy companies finance survival cheaply; the most leveraged borrower is exactly the one lenders stop funding first.

Growth-first management worked while the economy grew, but it converted the firm into a vehicle whose value depended on continuous new debt — so the first funding freeze was existential.

The self-rescue failed on trust: pledging assets when creditors already doubt your books cannot work; the market read it as confirmation rather than collateral.

Debt-funded growth is a promise that tomorrow's cash covers yesterday's borrowing; when the economy turns, the most leveraged player is first against the wall — size is not safety

The collapse reshaped Korean corporate governance: 'Daewoo cannot die' became the textbook warning for balance-sheet risk, and the workout system built for Daewoo was reused in later crises. The group's units were split, sold or liquidated over the following years.