Opting Out
On April 29, South Korea's Financial Services Commission (FSC) chairman Yim Jong-Yong stressed that the South Korean government will be engaged in no coercive corporate restructuring such as a big deal led by itself, claiming that it is far from desirable.
“During the financial crisis back in 1998, the South Korean government pushed ahead with such big deals but failed in some sectors including semiconductor, automobile and electronics,” he said, continuing, “A government-led restructuring is no solution at all in that it cannot avoid the lack of expertise.” At that time, Hyundai Electronics was forced to assume LG Semiconductor but the deal resulted in Hyundai’s corporate workout program. In addition, a business exchange between Samsung Motors and Daewoo Electronics foundered as the negotiations failed and the former went into receivership.
“These days, a government-led restructuring in the corporate sector is likely to cause more problems and trade disputes than before,” he continued to explain, adding, “Besides, enterprises’ financial structures have become more and more complicated, becoming associated with not only creditor banks but also non-banking sector loans and the like.”
He also emphasized that it is creditors, the Korea Development Bank (KDB) in particular, that should be at the center of the upcoming restructuring of South Korean shipbuilders and shipping companies. “Most market participants are convinced that the KDB is currently the best option as an organization to be in charge of the process and the government will allow the KDB to have more restructuring experts,” he remarked.