The financial regulator on Friday picked 112 small and medium enterprises to be placed under debt restructuring this year, as part of an effort to avert a sudden default in weak firms.
The number of heavy SME debtors selected for 2013 has jumped from 97 in 2012, the Financial Supervisory Service said, noting 54 of them were given a “C” rating and 58 others graded “D.”
The FSS releases the watch list of highly indebted companies twice every year ― that of large firms in the first half and the other with smaller enterprises in the second half ― as part of a regular corporate oversight.
Those rated “C” are subject to a debt workout program headed by their creditor banks, while the “D”-graded group must undergo debt restructuring either on their own or through court proceedings.
Smaller firms with total bank loans of less than 50 billion won ($47 million), or 5 billion won owed to one bank, are subject to the FSS’s heavy corporate debtor evaluation. This year, that included 16,004 players as possible candidates.
The FSS said the amount of loan exposure by local financial firms to the 112 SMEs reached 1.54 trillion won at the end of September, meaning 573.5 billion won worth of loan loss reserves are needed against potential defaults.
Banks have set aside 293.7 billion won as of end-September, with the remaining 279.8 billion won to be added, the regulator noted.
With more loss reserves required, banks are likely to see their combined capital adequacy ratio edge down to 13.86 percent from 13.88 percent as of end-June.
This year, more than a dozen SMEs in entertainment and leisure businesses, such as golf clubs, were added to the debtors list, largely due to the persistent economic downturn. The number of manufacturers also rose 20 percent on-year to 53 firms in 2013, the FSS said. (Yonhap News)
