The exchange said in a statement that the two companies reported they would carry out a 90-per cent capital reduction before the rights issues.

A Kia spokesman said that Kia and Asia had scheduled a capital reduction and rights issues as part of their restructuring plans, but the plans were revised after the two carmakers were put on sale last month in an international bid.

Kia said last week five international and local companies had submitted letters of intent to buy Kia and Asia. They are Hyundai Motor, unlisted Daewoo Motor, recently opened Samsung Motors Inc, Ford Motor Corp and General Motors

Some media reports said on Wednesday Samsung was considering dropping out, but a spokesman at Samsung Motors denied the report.

Kia's spokesman could not clarify whether the capital reductionwould affect all Kia shareholders. The official in charge of the matter at Andersen Consulting, which is organising the bidding process, was not available for comment.

Ford and Mazda together hold a 16.9-per cent stake in Kia. Ford owns 33.4 per cent of Mazda.

Yoo Chong-yul, the chairman of Kia, told reporters last Thursday that if there were a 90-per cent capital reduction, Ford and Mazda's stake would be cut to 1.69 per cent. He said Ford would have to buy a minimum 49 per cent stake in Kia if Ford was the successful bidder.

An official at the exchange said Kia's share capital would be 37.87 billion won ($30.1 million) after the capital reduction and would increase by 1.46 trillion won after the rights issues, putting its total share capital at about 1.5 trillion won.

He said Asia's share capital would be cut to 17.86 billion won and increased by 582.14 billion through the rights issues, making its share capital 600 billion won.

To penalise former Kia chairman Kim Sun-Hong and executiveshareholders for the mismanagement of Kia and Asia, their shares in Asia would be disposed of and they would have no rights to the new Kia issues, a statement by the exchange said.

It said Kia would issue 292.43 million shares through rights. Thirty million of those would be offered to employees, it said.

Of the rest, more than 152 million shares, which would be more than 51 per cent of the share capital after the issue, would be offered to the winner of the bid. Any remaining shares would be offered on the market.

Asia would issue 116.43 million new shares, of which 12 million would be offered to its employees and more than 61.2 million shares would be allocated to the winner of the international bid. Any remaining shares would be offered on the market.

Formal bids by firms competing to take over Kia and Asia and their deposits are due by August 21, and the winner is scheduled to be announced on September 1.

Kia creditors have offered to reschedule Kia's 8.75 trillion won and Asia's 3.07 trillionwon worth of liabilities, which would result in a write-off of some 4.5 trillion won in debt.

Kia and Asia shares both hit their daily lower limits, falling nearly 12 percent, to 945 won and 310 won respectively on news of the capital reduction, brokers said.