All-Party Bill Would Speed Restructuring

Legislation to speed the restructuring of financially troubled companies was announced yesterday with the backing of both ruling and opposition party members.

The proposed law would allow just three months for creditor financial institutions that want to resolve the debt problem of a borrower company to get on with the process. Otherwise the case will be forced into bankruptcy court.

Lawmakers Kang Un-tae of the ruling Millennium Democratic Party, Park Jong-keun of the opposition Grand National Party and Ahn Dae-ryun of the coalition partner United Liberal Democrats said Thursday that the bill will have joint sponsorship of all three parties.

The law, whose force would expire in 2005, would make the formation of a committee of creditors mandatory. One or more creditor financial institutions with claims totaling a quarter of the total loans outstanding against a company could call a creditors meeting. A three-quarters vote in terms of loans outstanding would constitute the committee, whose subsequent resolutions would be legally binding.

The law is intended to speed up the restructuring of the debts of a company unable to repay its obligations. Financial institutions with loans outstanding to a troubled company would no longer be allowed to balk at other creditors' attempts to restructure the debts, as their involvement at the creditors' meeting would become mandatory. Any firms choosing to opt out could dispose of its claims at market value.

But the law would also stay all actions by creditors to collect on loans once the meeting is called, and there are questions that it may be infringement on property rights. "It may even be unconstitutional," said an attorney, Limb Jae-yeon.

by Song Sang-hoon