SK Global hid losses of $1.2bn

The decision followed months of wrangling between SK Global's foreign and domestic creditors over the terms of any settlement of its debts.

Foreign creditors believed they were being short-changed by the proposals to restructure the firm's debts.

SK Global's shares were suspended on the Seoul stock market after the decision to apply for court receivership.

Still far apart

The trading firm is a subsidiary of SK Group, one of South Korea's largest chaebols. The Group includes South Korea's biggest mobile phone company and largest oil refiner.

"A company is like a living thing. SK Global should be put into an intensive care room, we cannot wait another minute," said Kim Seung-yu, the chief executive of Hana Bank, which is the stricken firm's major domestic creditor.

He said the Korean side had "done as much as possible" but that the negotiating positions of the two sets of creditors remained "far apart".

"Foreign creditors appear not to treat us as a negotiating partner," he said.

Test case

Foreign investors in South Korea have seen the collapse of SK Global as a test case of the domestic financial institutions' willingness to get tough with the secretive chaebols.

They have warned that foreign investors will be more wary of lending to South Korean companies.

Court receivership permits a firm to freeze debt repayments until the court decides whether to liquidate the company or not.

SK Global's total debt stood at 9.93 trillion won ($8.4bn) at the end of June, according to Hana Bank.

The receivership order will not go into effect for two weeks, to allow for last ditch talks.