SK Global, the trading affiliate of one of the country's largest chaebols SK Group, has been on the verge of bankruptcy since a 1.5 trillion won ($1.2bn) accounting fraud was uncovered in March.

The fate of SK Global has been seen as a test of President Roh Moo-hyun's drive to reform corporate accountability at the family-run groups, or chaebols, that control most of the economy.

But critics have already said that the bail out is another example of illegal accounting practices in South Korea.

And foreign investors had previously been sceptical of a viable and long-lasting bail out.

Punished

Under the rescue deal, SK Global will sell SK Corp an undisclosed stake in exchange for the dismissal of up to $7bn of debt.

The deal will allow SK Global to continue its business, and its shares rose by the daily limit of 15% on the back of the news.

On Friday, the chairman of SK Corp was sentenced to three years in prison for his part in the accounting fraud.

Chey Tae-Won is the eldest son of the group's founding family and controls the conglomerate and its 58 subsidiaries, including the country's leading mobile phone group SK Telecom.

Nine other SK executives received suspended jail terms.