South Korean commercial banks are busy trying to avoid losses during the course of credit exposure reduction with regard to Samsung Heavy Industries.
Recently, commercial banks applied three-month instead of six- and 12-month loan maturities to Samsung Heavy Industries as is the case with the state-run Korea Development Bank (KDB) and the special-purpose NH Bank. In addition, the NH Bank notified the shipbuilder that it would collect its 200 billion won loan maturing in October this year in a case where the upcoming capital increase does not go well. Moreover, commercial banks are becoming increasingly reluctant to issue refund guarantees for Samsung Heavy Industries.
Earlier, the maturity adjustment was regarded as an attempt to obtain the Samsung Group’s assistance in the paid-in capital increase. However, the banks remained hypercautious even after the shipbuilder’s recapitalization plan announcement, and this caused the financial authority to give a warning. “Commercial banks are buried in risk management these days,” it said, adding, “Samsung Heavy Industries has a very high ratio of commercial bank borrowings, which means commercial banks should be at the center of its restructuring, but cooperation is nowhere to be found as of now.”
As of the end of April this year, the main creditor bank KDB had a total loan of 963.4 billion won in Samsung Heavy Industries whereas the amounts were as large as 1.2354 trillion won, 1.1062 trillion won and 917 billion won for KEB Hana Bank, NH Bank and Shinhan Bank, respectively. In the case of Daewoo Shipbuilding & Marine Engineering, most of the loans pertained to the KDB and the state-run bank had to take the lead in its debt restructuring.
Such a cautious attitude of the commercial banks has to do with the lopsided portfolio of Samsung Heavy Industries that is contrary to Hyundai Heavy Industries’. “Samsung Heavy Industries is a company with too many uncertainties in that its business depends too heavily on offshore plants and is particularly vulnerable to potential problems such as delivery delay,” one of them mentioned.