Restructuring efforts quicken amid deepening economic slump

SEOUL, Dec. 11 (Yonhap) -- South Korea's government and local banks are preparing
a list of nonviable firms to be driven out of the market amid a depeening
economic slump as part of ongoing restructuring efforts, sources said Thursday.
The Financial Services Commission, the country's financial regulator, said on
Wednesday the government will focus on resuscitating firms reeling from a
liquidity crunch but judged to be viable once liquidity is provided.
"Restructuring efforts will be led by creditors, but the government will provide
sufficient support when necessary," the regulator said in a statement.
Local lenders such as Kookmin Bank and Hana Bank are also reviewing the financial
soundness of companies to which they extended loans. Banks have already allowed
27 construction firms to delay their debt payments by up to a year.
The government, meanwhile, is set to launch a 10-trillion won (US$7.44 billion)
fund pooled from banks and other financial companies to help cash-strapped firms.
South Korean lenders have been increasingly reluctant to extend loans after
taking measures to beef up risk management amid the credit crunch and the
economic slump.
As of the end of November, outstanding bank loans to large and smaller firms
totaled 466.3 trillion won, up 3.5 trillion won from a month earlier, according
to the Bank of Korea (BOK). The number marks the lowest monthly growth in
corporate lending since December 2007 when it declined by 4.2 trillion won.
Bank loans to larger companies increased by 900 billion won to 62.2 trillion won,
the slowest monthly growth since May when it rose by 100 billion won.
There are growing concerns financial market instability will lead to worsening
corporate liquidity and a slump in the real economy.
Market watchers expect broader restructuring in the construction and shipbuilding
industries.
On Tuesday, creditors of Hynix Semiconductor Inc., the world's second-largest
maker of computer memory chips, said they plan to inject 800 billion won to help
save the cash-strapped chipmaker.
Creditors of C& Group, a mid-sized conglomerate whose portfolio ranges from
construction to shipbuilding, are working to inject a fresh fund into the group's
shipyard and construction units.
The move comes at a time when the South Korean economy, Asia's fourth-largest,
faces a further slowdown in expansion down the road.
The central bank cut its key rate by the widest margin of one percentage point to
3 percent earlier in the day, signaling more rate cuts.
BOK chief Lee Seong-tae said the economy was expected to grow at a very slow pace
for a considerable time given the persistent global financial crisis. The economy
grew 0.5 percent on-quarter in the third quarter of the year, the smallest
expansion in four years, on falling exports and weak domestic demand.
sam@yna.co.kr
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