More small firms undergo debt workout in 2008

SEOUL, Feb. 3 (Yonhap) -- The number of small South Korean firms that entered
bank-initiated debt restructuring programs rose in 2008 from a year earlier amid
a slumping economy and a credit squeeze, the financial watchdog said Tuesday.
Local lenders selected a total of 1,428 small firms to enter the debt
rescheduling process last year, up from 954 the previous year, according to the
Financial Supervisory Service (FSS).
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.
"Hit by the global economic recession, the number of entrants to the debt workout
programs sharply rose in the second half of last year," the watchdog said.
As part of a corporate restructuring drive, banks decided in mid-January to end
support to two ailing companies and reschedule debts at 11 builders and three
shipbuilders.
The data came as the South Korean economy shrank a whopping 5.6 percent last
quarter from three months earlier, hit by the global financial turmoil and is
widely expected to log negative growth this quarter, lapsing into a recession, or
two straight quarters of quarterly decline.
The FSS said banks handed out 3.37 trillion won (US$2.42 billion) to troubled
companies in 2008. They have injected 15.8 trillion won into the program since
July 2004, the watchdog said.
Meanwhile, a total of 771 companies owing less than 50 billion won to the banks,
the limit set by the government, completed debt workouts in 2008, down from 1,010
a year ago, it added.
sooyeon@yna.co.kr
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