S. Korean lenders to restructure 20 builders, shipbuilders

SEOUL, March 27 (Yonhap) -- South Korean banks and non-bank financial
institutions will weed out five ailing companies and reschedule debts at 15
builders and shipbuilders to keep potential defaults from denting the slumping
economy, a bank association said Friday.
Many small and mid-sized construction firms and shipbuilders have been feeling
the pinch of the global economic slump, with some facing a severe liquidity
squeeze, as the export-driven Korean economy is markedly losing steam.
The restructuring drive was launched in Korea as a possible bankruptcy chain
reaction would undermine the soundness of the banking sector, dealing a harsh
blow to the whole economy.
The corporate revamp will force the financial firms, mostly banks, to put aside
about 196 billion won (US$146.7 million) in additional loan-loss reserves, which
will likely have only a limited impact on their financial health, the nation's
financial watchdog said.
Creditor financial firms have been assessing the financial health of 74 shipyards
and construction companies. The local financial sector extended 9.2 trillion won
in loans to them as of the end of February, out of which 1.6 trillion won was
lent to 20 ailing firms in question, according to the Financial Supervisory
Service.
The selection of troubled firms came after in mid-January, in the first phase of
the revamp drive, local banks decided to end support to two ailing companies and
reschedule debts at 11 builders and three shipbuilders.
Local banks are set to receive a capital injection through a bank
recapitalization fund as the slowing economy and a corporate restructuring revamp
are increasing the amount of distressed loans, hurting their financial health.
sooyeon@yna.co.kr
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