S. Korean funds begin to buy assets from ailing firms

By Kim Soo-yeon
SEOUL, June 17 (Yonhap) -- South Korea's debt clearer and a state-run policy
lender have begun to purchase assets from struggling companies as part of efforts
to speed up a corporate overhaul drive, industry sources said Wednesday.

South Korea plans to spend 20 trillion won (US$15.9 billion) out of an envisioned
40 trillion won restructuring fund this year, which is designed to buy distressed
loans and accelerate corporate restructuring.
According to sources, Korea Asset Management Corp. (KAMCO), which manages the
fund, plans to buy bad property-linked loans extended by banks by this month and
to purchase such bad debt held by securities firms and insurers later.
"By tapping the fund, the government expects that the corporate revamp move will
be accelerated by swiftly purchasing and clearing out assets from troubled
firms," the regulator Financial Services Commission said earlier.
South Korea also set up a 4 trillion won fund to buy idle ships from ailing local
shipping lines which have to sell their assets as part of restructuring efforts.
In a such drive, the KAMCO is seeking to buy a number of the 62 idle ships by
tapping the fund by the end of July, they added.
The move comes as bad loans are piling up amid a protracted economic slump and
the corporate revamp process, compromising local banks' financial soundness.
Local bank's bad loans totaled 19.3 trillion won as of the end of March, up from
14.7 trillion won three months earlier, according to the Financial Supervisory
Service. The ratio of 18 local lenders' nonperforming loans to total lending
reached 1.47 percent as of end-March, up 0.33 percentage point from the previous
quarter.
Meanwhile, the state-run Korea Development Bank (KDB) is moving to help
accelerate the corporate overhaul.
KDB said in May that it will set up a private equity fund with institutional
investors to buy corporate assets of large firms. The lender is in talks with
Dongbu Group to buy the group's metal unit Dongbu Metal Co.
In April, the policy lender also created a 100 billion won fund to help smaller
firms facing liquidity squeezes make a turnaround. As part of such efforts, KDB
bought Sunstar Precision Co., a producer of sewing and embroidery machinery, in
early June and is considering to purchase two or three other companies.
sooyeon@yna.co.kr
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