Creditors of South Korea's beleaguered Daewoo Group today finalized a plan to effectively dismantle the country's second-largest conglomerate, a process being closely watched by international investors as a test of the nation's commitment to financial reform.

Daewoo, which has 22 affiliates and accounts for about 5 percent of the country's gross domestic product, is caught under a mountain of debt. The restructuring, due to be finished by the end of this year, is designed to help the group lower its debt-to-equity ratio to 196 percent, from 527 percent at the end of 1998.

"Daewoo would be reshaped to a group specializing in automobiles, with four car-linked companies and two others supporting its business," Lee Hun-jai, chairman of the Financial Supervisory Commission, said in a statement.

Creditors said the units to be retained are Daewoo Motor, Daewoo Motor Sales, the trading division of Daewoo Corp., the car-related business of Daewoo Telecom, the machinery division of Daewoo Heavy Industries and Daewoo Capital.

Daewoo and GM are in preliminary talks on a strategic alliance. Creditors have said Daewoo is seeking $3.5 billion for control of Daewoo Motor, which is at the center of the car businesses.

Creditors said the group's remaining affiliates and business lines, including Daewoo Securities, the nation's largest brokerage, would be spun off or sold.

Analysts welcomed the timetable but said it likely would take more than five months to sell all the affiliates slated for sale.

"Major transactions will take quite a long time," said Rhee Namuh, executive director at Samsung Securities. "But it's good to see the government paved the way to push Daewoo to reform."

But analysts said investors might be disappointed to find that units such as the shipbuilding arm of Daewoo Heavy Industries can't easily find a buyer.

"The government will nationalize some of them," Rhee said.

Lee said that, if needed, the government would be willing to provide public funds to the creditors. "If the creditor banks face a reduction in their capital adequacy ratios due to the restructuring . . . the government is willing to consider injecting public funds into the creditor banks," he said.

Dilip Shanani, a senior fixed-income strategist at HSBC Markets in Hong Kong, said: "There is no direct bailout of Daewoo. What [the government is] doing is a controlled dismantling of Daewoo and allowing it not to destabilize the rest of the economy and ensure that the recovery continues."

CAPTION: A wall at Daewoo's Seoul headquarters lists the conglomerate's units. The company is being whittled down to a group specializing in automobiles.