More S. Korean small firms enter debt workouts in Q3

SEOUL, Dec. 10 (Yonhap) -- The number of small South Korean firms that entered
bank-initiated debt restructuring programs rose in the third quarter from three
months earlier amid a slowing economy and a credit squeeze, the financial
watchdog said Wednesday.

The program, in which creditor banks select financially troubled companies and
restructure their debts, was introduced in July 2004 to ease businesses' cash
crunches and prevent bankruptcies.
Local lenders selected a total of 386 small firms to enter the debt rescheduling
process in the July-September period, up from 245 the previous quarter, according
to the Financial Supervisory Service (FSS).
"Since early this year, the number of Korean firms under the workout program has
increased as their business conditions deteriorated and banks aggressively
stepped up efforts to control possible credit risks," an official at the FSS
said.
The data came as South Korea's economy is losing ground amid sluggish domestic
demand and faltering exports. More smaller firms have been feeling the pinch as
they find it more difficult to meet their financing needs amid the global
financial turmoil.
Asia's fourth-largest economy grew 0.5 percent in the third quarter from three
months earlier, the weakest growth in four years.
The FSS said banks handed out 886 billion won (US$611.9 million) to troubled
companies in the third quarter. They have injected 14.7 trillion won into the
program since July 2004, the watchdog said.
Meanwhile, a total of 159 companies owing less than 50 billion won to the banks,
the limit set by the government, completed debt workouts in the July-September
period, down from 272 in the second quarter, it added.
sooyeon@yna.co.kr
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