Number of small firms under debt workout jumps in Q1

SEOUL, May 13 (Yonhap) -- The number of small South Korean firms that entered
bank-initiated debt restructuring programs more than quadrupled in the first
quarter amid the slumping economy, the financial watchdog said Wednesday.

Local lenders selected a total of 580 small firms to enter the debt rescheduling
process in the January-March period, up 360.3 percent from 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.
"Local banks put more smaller companies under the debt rescheduling program as
the slowing economy was hurting such firms' financial conditions," the watchdog
said.
South Korean banks are in the process of restructuring ailing companies to
prevent their potential defaults from denting the slowing economy.
The data came as the South Korean economy is forecast to shrink 2.4 percent this
year, the worst performance in 11 years, stung by falling exports and sluggish
domestic demand.
The FSS said banks handed out 1.04 trillion won (US$843.6 million) to troubled
companies in the first three months of this year. They injected 16.8 trillion won
into the program since July 2004, the watchdog said.
Meanwhile, a total of 419 companies owing less than 50 billion won to the banks,
the limit set by the government, completed debt workouts in the first quarter, up
from 234 a year ago, it added.
sooyeon@yna.co.kr
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