Main Debtors
On May 11, the Financial Supervisory Service (FSS) of South Korea released this year’s list of main debtor groups, which consists of 36 business groups. They are required to undergo financial stability assessments by main creditor banks due to their heavy indebtedness. The FSS selects each of business groups and their affiliated companies as a main debtor group if its loans are equivalent to at least 0.075% of the total credit balance of all financial institutions. This year’s threshold is 1.4514 trillion won (US$1.3 billion).
The number of main debtor groups fell from 42 to 41 between 2014 and 2015 and then to 39 in 2016. This year, Sungwoo Hitech has been added to the list. According to the FSS, this company’s loans from the state-run banks including the Korea Development Bank increased recently during the course of its penetration of the Chinese market with Hyundai Motor Company and Kia Motors. The number of the companies belonging to the main debtors groups edged up from 4,443 to 4,445 between last year and this year. Sungwoo Hitech owns 29 of them.
Meanwhile, STX Offshore & Shipbuilding, Hyundai, Hansol and Taeyoung have been excluded from the list this year. This is because STX Offshore & Shipbuilding went into receivership in May last year, Hyundai spun off Hyundai Merchant Marine and Hansol and Taeyoung reduced their loans.
Those main debtor groups are scheduled to undergo financial assessments by their main creditor banks. Then, they have to form agreements and improve their financial conditions if necessary. The FSS is planning to conduct such assessments whenever needed even in the groups exempted from the agreements.
The five most heavily indebted on this year’s list are the Samsung, Hyundai Motor, SK, LG and Hyundai Heavy Industries Groups. Their total debts amount to 117.6 trillion won (US$105 billion). South Korean financial institutions’ corporate credit offering totals 270.8 trillion won (US$243 billion) as of now. The amount fell by approximately 29.9 trillion won (US$26 billion) in comparison to last year.