Ailing builder put under debt workout

SEOUL, Jan. 23 (Yonhap) -- Creditors of a troubled local construction company
started debt rescheduling procedures on Friday to help the firm stay afloat and
normalize business, the builder's main bank said.
Isu Engineering & Construction Co., the nation's 64th-largest builder, became the
first company to undergo debt rescheduling in line with a corporate restructuring
drive. On Tuesday, creditors decided to end support to two ailing firms and
reschedule debts at 11 builders and three shipbuilders.
"In accordance with the decision, five creditor institutions put the builder on a
debt workout program in an effort to help it turn around," said the main
creditor, Korea Exchange Bank (KEB).
Under the program, Isu Engineering & Construction will be allowed to defer the
repayment of debts for three months until April 22 and normalize its operations
with the help of creditors, KEB 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.
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.
The government has called on local lenders to speed up the process of singling
out unhealthy builders 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 overhaul drive will force the financial firms, mostly banks, to put aside
about 2.23 trillion won (US$1.6 billion) in additional loan-loss reserves, but
that will likely have a limited impact on their financial health, the nation's
financial watchdog said.
sooyeon@yna.co.kr
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