Up to 14 big businesses, including the Hyundai Group, Halla Group, and Daesung Industrial, are being subject to creditor management due to their heavy liabilities.
According to industry sources, main creditor banks such as the Korea Development Bank and Kookmin Bank decided recently to apply new, strengthened standards to increase the number of the large corporations in the main debtor group to about 43. At the same time, the main creditor banks’ supervisory rights are reinforced significantly to have a sizable impact on the management of leading Korean conglomerates.
This year’s new entries in the main debtor group include Hyundai, Halla, Daesung Industrial, SPP Shipbuilding, Hankook Tire, Hite Jinro, Pungsan, Hansol, STX Shipbuilding, and Hyundai Development. Most of them have been out of the group since 2009. Notable existing entries include Hyundai Motor Company, Samsung, SK, LG, Hyundai Heavy Industries, POSCO, Doosan, GS, Hanjin, Lotte, Hanwha, Daewoo Shipbuilding & Marine Engineering, LS, Hyosung, Kumho Asiana, CJ, Dongguk Steel, Dongbu, KT, Daelim, Shinsegae, OCI, KOLON, Daewoo E&C, S-Oil, SeAH, Sungdong Shipbuilding & Marine Engineering, and others.
“The strengthened standards imply that we are capable of handling these corporations’ insolvency risks in advance more effectively,” said a high-ranking official at a creditor bank. This year, the banking-sector credit exposure ratio in the criteria has been lowered from 1.0 percent to 0.075 percent, so as to better monitor the insolvency risks.
The creditor banks are planning to assess the new entries’ financial structures by the end of this year, and then conclude financial restructuring agreements in June with the most vulnerable ones. In addition, information provision agreements are signed with the companies for more effective information collection and monitoring based on inter-bank guidelines.
The financial authorities are going to beef up their restructuring activities on an ongoing basis for financial market stability. It is in this context that the Financial Supervisory Services recently urged the top management of the Hyundai Group and the Dongbu Group to implement the restructuring plans through prompt asset disposal. The Hanjin Group, the parent company of Korean Air, has acquired the management rights of Hanjin Shipping in response to the call, too.