Bad Bank
UAMCO is getting into the business of restructuring insolvent companies next month by raising a fund of 4.2 trillion won (US$3.7 billion). It is expected that stocks and bonds worth up to 28 trillion won (US$25 billion) will be able to be bought with this seed money.
The Financial Services Commission and the eight shareholder banks of UAMCO finalized and released their plan on Oct. 22 for the expansion of UAMCO’s role as a corporate restructuring company as well as a bad bank. According to the plan, UAMCO is to set up a private equity fund for corporate financial stability so it can purchase the bonds and shares of distressed companies for restructuring purposes.
The starting capital of the PEF is to be prepared by adjusting the capital commitment applied to the shareholder banks from 1 trillion won (US$888 million) to 1.25 trillion won (US$1.11 billion) and increasing the loan commitment from 500 billion won (US$444 million) to 2 trillion won (US$1.8 billion). Financial resources of 4.2 trillion won (US$3.7 billion), including existing capital and corporate bonds, are made available in this case.
If UAMCO takes over 30 to 50 percent of the shares of the PEF and purchases such bonds and stocks at discounted prices, 12 to 28 trillion won (US$10 to $25 billion) worth of stocks and bonds can be acquired via the PEF. In addition, the commitments can be expanded through discussions with the shareholder banks, and thus the amount can be increased as well. An actual purchase is likely to be started from early next year in view of the due diligence and assessment periods, and agreements between borrowers and banks.