[THE INVESTOR] The Financial Supervisory Service said on Aug. 7 it will push 32 companies, including listed conglomerates, to restructure their bad debts through intensive creditor-led workout or court receivership programs.

After a rigorous credit screening and evaluation of some 600 companies that borrowed more than 50 billion won ($45 million) from the financial sector, the regulator graded 13 companies “C” and 19 “D.”

The C-graded companies, including Hanjin Shipping and Hyundai Merchant Marine, will be under creditor-led workout programs, while the D-graded companies, including STX Offshore & Shipbuilding, will be under court receivership. Hanjin and HMM had already issued their own set of self-rehabilitation programs to their creditors. 





This comes as the Financial Services Commission seeks to carry out the “three-track” system of corporate restructuring.

Under the scheme, the regulator in collaboration with other state agencies and creditor banks will identify and restructure companies suffering from an industry slowdown; companies showing signs of default on their debt; and those with overcapacity.

Shipping and shipbuilding companies such as Hyundai Merchant Marine, Hanjin Shipping,Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering will top the list for major debt restructuring.

With billions of dollars of policy bank loans held by shippers and shipbuilders that are about to turn bad, massive job losses are inevitable, in addition to the increase in asset sales during the restructuring process led by Korea Development Bank and Export-Import Bank of Korea.

The Finance Ministry announced last month its plan to allocate extra spending of 11 trillion won to create 68,000 jobs, amid expectations of increasing youth unemployment following corporate restructuring. However, it will actually be spending around 6 trillion won more as some 5 trillion won will be used for debt payback, corporate restructuring and policy bank recapitalization, as well as to provide regional financing.

By Park Hyong-ki/The Korea Herald (hkp@heraldcorp.com)