ID :
41798
Wed, 01/21/2009 - 03:22
Auther :
Shortlink :
https://www.oananews.org//node/41798
The shortlink copeid
S. Korean lenders to restructure 16 builders, shipbuilders
(ATTN: RECASTS headline, lead; ADDS more details and backgrounds from para 2)
SEOUL, Jan. 20 (Yonhap) -- South Korean banks and non-bank financial institutions
will weed out two ailing companies and reschedule debts at 14 others to keep
potential defaults from rattling the slumping economy, a bank association said
Tuesday.
The restructuring drive will force the financial firms, mostly banks, to put
aside about 2.23 trillion won (US$1.62 billion) in additional loan-loss reserves,
which will likely have only a limited impact on their financial health, the
nation's financial watchdog said.
The move comes as many small and mid-sized construction firms and shipbuilders
have been feeling the pinch of the global financial crisis, with some facing a
severe liquidity squeeze.
Analysts have warned that a possible bankruptcy chain reaction will undermine the
soundness of the banking sector, dealing a harsh blow to the whole economy.
"Local creditor financial firms decided to end support to two companies and put
11 builders and three shipbuilders under a bank-initiated debt rescheduling
program," the Korea Federation of Banks (KFB) said in a statement.
The two companies -- Daeju Construction Co. and C&Heavy Industries Co. -- will be
urged to file for court protection or survive on their own, the KFB said.
Creditor financial institutions will help 14 companies, including mid-sized
builder Keangnam Enterprises, normalize their business by rescheduling their
debts, it said.
Since late December, the Financial Supervisory Service (FSS) has called on local
lenders to accelerate the process of singling out unhealthy construction firms
and shipbuilders in a bid to ensure the supply of much-needed funds to viable
companies and prevent the delay in corporate revamps from weighing on the sharply
slowing economy.
"The watchdog will seek further corporate restructuring if needed after
reevaluating credit risks at builders and shipyards," Kim Jong-chang, governor of
the FSS, told a press conference. "We will also make efforts to beef up
monitoring of other industries and large companies."
A slowing economy has resulted in a huge number of unsold apartments, and many
cash-strapped small and mid-sized construction firms are now struggling to
service debts taken out during the 2005-2006 housing boom.
South Korean shipyards, which secured record orders in recent years due to strong
demand, are also suffering as a sharp decline in new orders and foreign exchange
losses are eroding their profitability.
But local banks have been hesitant to force troubled companies out of the market
as corporate overhauls require them put aside more loan loss reserves, hurting
their profitability. But government policymakers have said early and timely
restructuring is necessary to head off an economic crisis.
South Korean lenders are struggling to bolster their falling capital adequacy
ratios, a key barometer of financial health, as the slowing economy and the
credit squeeze are increasing the amount of bad loans.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.86 percent as of the end of September, down 0.5 percentage point from three
months earlier.
The FSS said their capital adequacy ratio may fall by an average 0.16 percentage
point to 10.7 percent due to the corporate overhaul.
The bank association said local lenders will start the process of reviewing
credit risks at other ailing construction firms and shipyards soon. They plan to
supply cash to companies that are suffering from a temporary liquidity crunch, it
added.
Experts expressed disappointment at the outcome, however, saying local banks were
not acting aggressively enough in picking out unhealthy firms.
"It is not understandable that there are so few firms being weeded out, given
current situations," said Kim Kwang-doo, an economics professor at Sogang
University. "If the market sees the results as a stop-gap measure, funds may not
flow smoothly, weighing on the economy."
Observers say that if uncertainty over which firms should be collapsed lingers
too long, local banks will grow increasingly wary of lending, prolonging the
credit crunch.
sooyeon@yna.co.kr
(END)
SEOUL, Jan. 20 (Yonhap) -- South Korean banks and non-bank financial institutions
will weed out two ailing companies and reschedule debts at 14 others to keep
potential defaults from rattling the slumping economy, a bank association said
Tuesday.
The restructuring drive will force the financial firms, mostly banks, to put
aside about 2.23 trillion won (US$1.62 billion) in additional loan-loss reserves,
which will likely have only a limited impact on their financial health, the
nation's financial watchdog said.
The move comes as many small and mid-sized construction firms and shipbuilders
have been feeling the pinch of the global financial crisis, with some facing a
severe liquidity squeeze.
Analysts have warned that a possible bankruptcy chain reaction will undermine the
soundness of the banking sector, dealing a harsh blow to the whole economy.
"Local creditor financial firms decided to end support to two companies and put
11 builders and three shipbuilders under a bank-initiated debt rescheduling
program," the Korea Federation of Banks (KFB) said in a statement.
The two companies -- Daeju Construction Co. and C&Heavy Industries Co. -- will be
urged to file for court protection or survive on their own, the KFB said.
Creditor financial institutions will help 14 companies, including mid-sized
builder Keangnam Enterprises, normalize their business by rescheduling their
debts, it said.
Since late December, the Financial Supervisory Service (FSS) has called on local
lenders to accelerate the process of singling out unhealthy construction firms
and shipbuilders in a bid to ensure the supply of much-needed funds to viable
companies and prevent the delay in corporate revamps from weighing on the sharply
slowing economy.
"The watchdog will seek further corporate restructuring if needed after
reevaluating credit risks at builders and shipyards," Kim Jong-chang, governor of
the FSS, told a press conference. "We will also make efforts to beef up
monitoring of other industries and large companies."
A slowing economy has resulted in a huge number of unsold apartments, and many
cash-strapped small and mid-sized construction firms are now struggling to
service debts taken out during the 2005-2006 housing boom.
South Korean shipyards, which secured record orders in recent years due to strong
demand, are also suffering as a sharp decline in new orders and foreign exchange
losses are eroding their profitability.
But local banks have been hesitant to force troubled companies out of the market
as corporate overhauls require them put aside more loan loss reserves, hurting
their profitability. But government policymakers have said early and timely
restructuring is necessary to head off an economic crisis.
South Korean lenders are struggling to bolster their falling capital adequacy
ratios, a key barometer of financial health, as the slowing economy and the
credit squeeze are increasing the amount of bad loans.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.86 percent as of the end of September, down 0.5 percentage point from three
months earlier.
The FSS said their capital adequacy ratio may fall by an average 0.16 percentage
point to 10.7 percent due to the corporate overhaul.
The bank association said local lenders will start the process of reviewing
credit risks at other ailing construction firms and shipyards soon. They plan to
supply cash to companies that are suffering from a temporary liquidity crunch, it
added.
Experts expressed disappointment at the outcome, however, saying local banks were
not acting aggressively enough in picking out unhealthy firms.
"It is not understandable that there are so few firms being weeded out, given
current situations," said Kim Kwang-doo, an economics professor at Sogang
University. "If the market sees the results as a stop-gap measure, funds may not
flow smoothly, weighing on the economy."
Observers say that if uncertainty over which firms should be collapsed lingers
too long, local banks will grow increasingly wary of lending, prolonging the
credit crunch.
sooyeon@yna.co.kr
(END)
