97 SMEs face restructuring

The Financial Supervisory Service revealed yesterday that 97 SMEs will face corporate restructuring this year due to the faltering global economy.

This year’s figure is up 26 percent from last year’s 77 firms, it said.

After conducting a three-month annual credit risk evaluation of the 1,356 SMEs that are deemed borderline credit risks with debts between 5 billion won ($4.6 million) and 50 billion won, 45 firms received C ratings and 52 firms got D ratings, the FSS said.

The number of SMEs with the highest-risk D rating surged 20.1 percent on-year, marking a record high since the evaluations were first carried out in 2009 in the wake of the U.S. subprime mortgage crisis. All 52 are likely to enter court receivership, the regulator said.

Those with C ratings will normalize their operations via debt-workout programs assisted by creditor banks, it added.

Some 43 of the companies on the list are in the manufacturing sector, indicating how it has borne the brunt of the global economic turmoil, followed by real estate, construction, restaurants, wholesale and retail sales.

While the number of manufacturing companies slipped by six from 2011, real estate, construction and logistics firms saw the steepest growth as a combined 32 were placed on the FSS’s restructuring plan, up from 14 last year.

“No logistics firms were put on the restructuring program last year, but six have been chosen this year, meaning that industry earnings have been badly effected by the slowing economy,” said Lee Gi-youn, deputy chief of the banking department watchdog.

“The FSS will ensure the companies on the list turn themselves around under the guidance of main creditors. It will also push for extending bank lending to help improve their financial soundness.”

According to the FSS, the 97 companies took out a combined 1.27 trillion won in loans. The lion’s share of 872 billion won came from local banks, followed by 96.1 billion won from savings banks and 22.1 billion won from insurance firms.

The financial watchdog said banks need to shore up an additional 298.5 billion won in bad debt reserves to facilitate corporate restructuring.

By Kim Mi-ju [mijukim@joongang.co.kr]