Sharing Profits After Companies Go Back to Normal
The South Korean government is working on a scheme in which it provides support for companies in key industries such as aviation and their profits can be shared with the society after their business goes back to normal.
The scheme is likely to be based on corporate bond purchase in those industries after recapitalization via Korea Development Bank and the Export-Import Bank of Korea. This method is advantageous in that it requires neither special purpose vehicle establishment nor government guarantee and time can be saved with Korea Development Bank already underwriting corporate bonds. In addition, this method is freer from fairness controversies related to government guarantee selection criteria.
In the scheme, the two banks are likely to make selections based on their accumulated know-how with the government providing cash for the banks by means of supplementary budgets. According to experts, the financial support by this method is likely to be at least 20 trillion won and may reach 50 trillion won or more with strings attached in the form of continuous employment, limited dividend, etc.
At present, Korean Air's financial conditions are seriously deteriorating. Although it issued asset-backed securities worth 622.8 billion won last month, 240 billion won of corporate bonds will mature this month and the airline's monthly fixed costs are no less than 500 billion won. The company's repayment and redemption scheduled for this year amount to 4.03 trillion won.
The Korea Automobile Manufacturers Association recently said that a liquidity of 32.8 trillion won or more needs to be immediately supplied to the automobile and auto parts industries. In the oil refining industry, which is facing a plummeting demand and a reverse margin, the Q1 operating loss is estimated at no less than 2.5 trillion won.