Banks set guidelines to weed out nonviable builders, shipyards: report

SEOUL, Jan. 1 (Yonhap) -- Corporate restructuring efforts in South Korea are
likely to accelerate as authorities will soon start evaluating struggling
builders and shipyards before providing financial support for their survival, a
local media report said Thursday.
The Korea Federation of Banks, which consists of local banks, has determined a
set of guidelines to evaluate business conditions of those companies, the Korea
Economic Daily reported, quoting industry sources.
Under the guidelines, creditor banks will categorize local builders and shipyards
into four groups -- A, B, C, D. Companies falling into the "C" group will face a
debt workout while those in the "D" group will be categorized as "non-viable"
businesses and will face bankruptcy procedures, the report showed.
Those in the "B" group, meanwhile, will receive fresh loan support from the banks
in return for self-restructuring programs, according to the report.
Evaluations will be done through a task force consisting of officials from local
banks, credit appraisers and accounting firms. The process will begin with the
top 100 builders and 26 small and medium-sized shipyards, the report said, citing
an unidentified official. Officials from the bank association were not reached
for comment.
The move comes as concerns are growing that a slowing economy could make things
worse for already-struggling companies in the two sectors.
With a huge number of apartments left unsold, many cash-strapped construction
firms are striving to service debts taken out during the 2005-2006 housing boom.
South Korean shipyards are also feeling the pinch of the slumping economy and a
sharp decline in new orders, along with foreign exchange losses, are eroding
their profitability. Some smaller players are facing a severe liquidity squeeze,
according to industry watchers.
kokobj@yna.co.kr
(END)