ID :
39224
Wed, 01/07/2009 - 15:01
Auther :
Shortlink :
http://m.oananews.org//node/39224
The shortlink copeid
Local banks set to launch corporate revamp process
SEOUL, Jan. 7 (Yonhap) -- South Korean banks are set to begin restructuring
non-viable construction firms and shipbuilders this month in an effort to ensure
the supply of much-needed funds to viable companies, industry sources said
Wednesday.
The nation's financial watchdog said on Dec. 23 that South Korea will seek to
overhaul struggling builders and shipbuilders starting this month. Their
potential insolvencies would weigh on the real economy, according to the
Financial Supervisory Service (FSS).
But local lenders have been hesitant to force troubled companies out of the
market, which government policymakers say is necessary for heading off an
economic crisis. The revamp is intended to bolster firms that still show promise
but collapse those which are deemed irreparable.
The FSS has notified local banks that they need to review the financial health of
92 construction firms and 19 small- and mid-sized shipbuilders to determine who
will be subject to overhaul by Jan. 16, according to industry sources.
Local banks plan to expand the pool of potential candidates to about 210 builders
and an estimated 30 shipyards by the first quarter of this year.
The restructuring plan comes as a slowing economy has resulted in a huge number
of unsold apartments, and many cash-strapped small and mid-sized construction
firms are struggling to service debts taken out during the 2005-2006 housing
boom.
South Korean shipyards, which have secured record orders in recent years due to
strong demand, are also feeling the pinch as 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.
But experts say the process may hit trouble because of its ambitious deadline and
murky standards by which banks are expected to determine which firms are due for
a revamp.
"If the corporate overhaul does not take place swiftly, unhealthy firms will stay
in the market, which would weigh even on viable firms," said Jeon Hyo-chan, an
economist at Samsung Economic Research Institute.
Local lenders have been increasingly reluctant to give loans to companies and
households as the deepening economic slump and a credit crunch are increasing the
amount of bad debt.
Amid such challenges, many banks are also struggling to raise their declining
capital adequacy ratio, a key barometer of financial soundness that measures the
percentage of a bank's capital against its risk-weighted credit.
The construction sector overhaul will cost eight banks an estimated 4.3 trillion
won (US$3.33 billion) in losses in the case that 10 players are weeded out among
38 listed builders, KB Investment & Securities Co. said in a report.
sooyeon@yna.co.kr
(END)
non-viable construction firms and shipbuilders this month in an effort to ensure
the supply of much-needed funds to viable companies, industry sources said
Wednesday.
The nation's financial watchdog said on Dec. 23 that South Korea will seek to
overhaul struggling builders and shipbuilders starting this month. Their
potential insolvencies would weigh on the real economy, according to the
Financial Supervisory Service (FSS).
But local lenders have been hesitant to force troubled companies out of the
market, which government policymakers say is necessary for heading off an
economic crisis. The revamp is intended to bolster firms that still show promise
but collapse those which are deemed irreparable.
The FSS has notified local banks that they need to review the financial health of
92 construction firms and 19 small- and mid-sized shipbuilders to determine who
will be subject to overhaul by Jan. 16, according to industry sources.
Local banks plan to expand the pool of potential candidates to about 210 builders
and an estimated 30 shipyards by the first quarter of this year.
The restructuring plan comes as a slowing economy has resulted in a huge number
of unsold apartments, and many cash-strapped small and mid-sized construction
firms are struggling to service debts taken out during the 2005-2006 housing
boom.
South Korean shipyards, which have secured record orders in recent years due to
strong demand, are also feeling the pinch as 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.
But experts say the process may hit trouble because of its ambitious deadline and
murky standards by which banks are expected to determine which firms are due for
a revamp.
"If the corporate overhaul does not take place swiftly, unhealthy firms will stay
in the market, which would weigh even on viable firms," said Jeon Hyo-chan, an
economist at Samsung Economic Research Institute.
Local lenders have been increasingly reluctant to give loans to companies and
households as the deepening economic slump and a credit crunch are increasing the
amount of bad debt.
Amid such challenges, many banks are also struggling to raise their declining
capital adequacy ratio, a key barometer of financial soundness that measures the
percentage of a bank's capital against its risk-weighted credit.
The construction sector overhaul will cost eight banks an estimated 4.3 trillion
won (US$3.33 billion) in losses in the case that 10 players are weeded out among
38 listed builders, KB Investment & Securities Co. said in a report.
sooyeon@yna.co.kr
(END)
