Daewoo added 14 subsidiaries in the year it went bankrupt with $50B in debt

Kim Woo-choong founded Daewoo in 1967 as a five-person textile trader in Seoul. By 1998 it was South Korea's second-largest conglomerate: 320,000 employees, 275 subsidiaries across 100 countries, ₩62 trillion in annual sales, and combined assets larger than the GDP of the Philippines. Daewoo built ships, cars, electronics, hotels and apartment blocks, and accounted for 17 percent of South Korea's entire economy.

The growth was debt-funded from the start — government-sponsored cheap loans secured against expected export profits. By end-1997, debt stood at nearly five times equity. When the Asian financial crisis hit that December, Samsung and LG cut back. Daewoo did the opposite: it took on 40 percent more debt and added 14 new firms to its existing 275 subsidiaries. The bet was that the crisis would pass and the expansion would pay off. Credit had become scarce, but Daewoo kept borrowing.

On 16 August 1999, creditors forced a dismantling agreement: 16 of 22 companies to be sold by 31 December. On 1 November the group was declared bankrupt with at least $50 billion in debt, $9.9 billion owed to foreign creditors. A later investigation uncovered ₩41 trillion in accounting fraud — inflated assets, hidden liabilities, fabricated export receipts. Kim Woo-choong fled, returned in 2005, and was sentenced to ten years. Daewoo Motors went to General Motors; the shipbuilding arm became DSME; the brand survived only on electronics and buses.

Added 40% more debt and 14 subsidiaries in the crisis year, betting expansion would outrun the downturn; collapsed with $50B debt and ₩41T fraud.

Debt-to-equity of nearly 5:1 left no margin for a credit squeeze — and the crisis was exactly a credit squeeze

While competitors deleveraged, Daewoo doubled down: 40% more debt and 14 new subsidiaries in the crisis year, betting that expansion would outrun the downturn

Cross-guarantees between 275 subsidiaries meant one default could cascade — the structure was designed for growth, not for stress

₩41 trillion in accounting fraud hid the true position from creditors and regulators until the collapse made it undeniable

When every competitor is deleveraging and you are borrowing more, you are not being brave — you are the last one holding the risk nobody else wanted.