Not Led by Market
A special advisory committee to President Moon Jae-in’s new government said on May 28 that workers, subcontractors and the regional economy they constitute are not less important than investors during the course of corporate restructuring and market-friendly restructuring cannot be maintained as it has been. Under the circumstances, corporate restructuring led by capital market participants such as private equity funds (PEFs) is expected to be halted in South Korea along with the establishment of a new market-led corporate restructuring fund by its financial authorities.
“At present, we are discussing the direction of the government’s restructuring policy and we do not completely deny the previous administration’s corporate restructuring policy that is characterized by being driven by the government,” the committee explained, adding, “Some of the policy measures that were used by the previous administration can be adopted again in the current government.”
Also being discussed is the restructuring of the debt of Daewoo Shipbuilding & Marine Engineering, in which the National Pension Service and multiple state-run banks decided to participate after a heated controversy. Regarding this issue, the Financial Services Commission of South Korea announced last month that it would establish a master-feeder fund, in which the government provides a subsidy for investment by the private-sector participants including PEFs, so that the limitations of the restructuring of South Korean shipping and shipbuilding companies led by the government and state-run banks can be overcome.
In the meantime, PEFs are hesitating to participate in the new restructuring fund, which began to be devised early this year. “Nothing can be determined until the Moon Jae-in government clarifies its stance and, besides, we cannot be sure about the continuation of the fund,” one of them mentioned, adding, “Moreover, our participation in the new fund cannot but be limited because of demands from the pension funds that put their money in ourselves.” Another PEF pointed out that the new fund is not new at all in that the government is supposed to maintain its influence on the management of the master fund raised by state-run and commercial banks.