Gov’t retools restructuring policy

The Financial Services Commission, the country’s top financial regulatory agency, announced a corporate restructuring plan on Thursday that will shift the dominant role currently played by state-owned banks in companies’ restructuring to capital market players, including private equity funds.

At the plan’s core is an 8 trillion won ($7.1 billion) restructuring fund to be developed over the next five years with cooperation from select private investors. While state-backed policy banks and Uamco, a private institution established by local banks for the management of nonperforming loans, will raise 4 trillion won, the remaining 4 trillion won will be covered by private equity funds.

The Financial Services Commission said the public side will come up with a 1 trillion won fund this year while the private sector will raise another 1 trillion won.

Over the years, state-owned banks like Korea Development Bank and the Export-Import Bank of Korea have played an outsize role in bailing out indebted companies like Daewoo Shipbuilding and Marine Engineering, inflicting significant losses on the banks.

“Corporate restructuring led by state-run policy banks has limitations,” said Yim Jong-yong, chairman of the Financial Services Commission.

Yim explained that investors in the private sector would take the wheel in devising liquidation measures and potential buyout plans through negotiations with the indebted companies, whereas state-run bodies will largely take on a mitigating role between the two parties.

The regulatory agency pledged to establish a committee tasked with handling conflicts. If the fund operators and companies undergoing restructuring disagree on selling prices, the committee will offer a reference price.

The Financial Services Commission also vowed to require creditor banks to adopt stricter credit rating systems and employ experienced specialists to ensure restructuring progresses in a timely manner.

Meanwhile, the fate of cash-strapped Daewoo Shipbuilding and Marine Engineering still hangs in the balance as negotiations between creditors over another bailout have been stuck in limbo. With no progress made, the government-run National Pension Service, a major stakeholder in the shipbuilder’s debt, is expected to make a final decision on whether to approve another bailout today.

On Monday, Lee Dong-geol, chairman of Korea Development Bank, the shipbuilder’s main creditor, and Choi Jong-ku, CEO of the Export-Import Bank of Korea, another creditor, met with officials from 32 bond-holding institutions including the National Pension Service and Korea Post.

However, executives from the institutions, including Kang Myun-wook, the chief investment officer of the National Pension Service, did not attend, prompting further speculation that a majority of debt-holding institutions will likely turn down the plan.

On Tuesday, the pension fund requested Korea Development Bank extend the deadline for bondholders to make a decision on a bailout and allow the pension service to investigate the case on its own, saying the bank provided insufficient information.

The National Pension Service also suggested postponing the effective date of debt adjustment to July rather than immediately start from the debt that’s set to mature on April 21.

The Financial Services Commission and Korea Development Bank said they could not comply with both requests as the creditors’ meeting is only a few days away.

BY PARK EUN-JEE, CHOI HYUNG-JO [park.eunjee@joongang.co.kr]