Fears of chain bankruptcies are mounting among domestic construction companies following Sambu Construction Co.’s filing on Tuesday for a court-protected rehabilitation process.

Holder of Korea’s first construction business license, Sambu placed 34th among the nation’s top 100 builders last year. It applied for court protection as financial companies refused to roll over the 427 billion won project finance loans it took out for a housing development project in southern Seoul in 2008.

Sambu was the fifth top 100 builder to go under since December last year. The four victims that preceded it were Dongil Construction (49th), World Construction (73rd), Chin Hung International (43rd) and LIG Engineering & Construction (47th).

What drove these companies into trouble were PF loans they obtained before the global financial crisis in 2008. Many of the real estate development projects they promoted went sour in the aftermath of the financial tsunami, making it difficult for them to repay the maturing loans.

As a result, bad loans piled up on the balance sheets of the financial companies that extended PF loans. Among the lenders, savings banks were in particularly serious trouble as their exposure to property developers and builders was excessively high.

Recently, savings banks began to put the screws on builders for loan repayment as they were driven into a corner by the Financial Supervisory Commission. In January, the FSC took a scalpel to the savings bank sector and suspended the operations of eight insolvent players. At the same time, it instructed the surviving banks to keep PF loans below 30 percent of their outstanding loans.

The regulator’s move was intended to head off systemic risks posed by the ailing savings bank sector. But its stunning move sent savings banks scrambling for their survival. While boosting their capital ratio, they set out to collect loans from builders.

According to the FSC, non-bank finance companies had a total of 27.8 trillion won worth of PF loans extended to builders as of the end of 2010. Savings banks accounted for 44 percent or 12.2 trillion won of the total, with about 10 trillion won of it scheduled to mature within this year.

As savings banks are determined to lower their exposure to risky clients, they are unlikely to roll over the maturing PF loans.

To make matters worse, creditor banks are also moving to step up their scrutiny of builders as they are annoyed by their bankruptcy filings made without any prior consultation.

Banks suffer huge losses when the court grants a troubled company protection from its creditors. Therefore, they prefer out-of-court debt rescheduling for liquidity-strapped firms. Hence when Sambu and LIG filed for court protection without notice, banks were not only surprised but felt betrayed. In response, they declared they would use stricter criteria in assessing builders’ credit ratings.

The banks’ move to toughen their risk analysis of construction companies is welcome. But they need to do so for all companies, regardless of their business fields.

In collecting PF loans from builders, savings banks must take care not to drive viable companies into bankruptcy. If bankruptcy increases, it would further worsen their balance sheets. Therefore, the financial regulator should make sure that savings banks do not force viable builders to file for court receivership.

On Thursday, Kwon Hyouk-se, governor of the Financial Supervisory Service, said he would map out measures to prevent PF loan collection from pushing builders into a corner. He should waste no time easing the credit crunch of the construction industry.

The financial regulator also needs to revive the Corporate Restructuring Promotion Act that expired in December last year. This law makes it easier for distressed firms to pursue restructuring without resorting to the more cumbersome and costly court-managed bankruptcy procedure.