Financial authorities are in the process of evaluating and reviewing credit standings of domestic companies in financial turmoil in the industrial sectors, such as shipping, shipbuilding and construction, that have been in a prolonged slump.
The Financial Services Commission and its financial regulatory enforcement arm, the Financial Supervisory Service, are said to be engaged in due diligence of companies that borrowed more than 50 billion won ($45.4 million).
There are reportedly around 1,000 parent groups and their subsidiaries and affiliates teetering on the edge of bankruptcy, stemming from overhang of debts on the global shipping and construction downturn.
Among those companies is STX Group, which has been financially distressed since 2008, and now faces a liquidity crunch and seeks a creditor bailout from financial companies such as the state-run Korea Development Bank.
Its core subsidiary STX Offshore & Shipbuilding requested financial assistance from its bank creditors early last month as the company continued to face credit problems amid the industry slowdown. The group’s core shipping subsidiary STX Pan Ocean has also been financially suffering.
This is also putting the world’s fourth-largest shipbuilder’s banks at risk of a rating downgrade.
“(STX’s request for voluntary debt restructuring) is credit negative for the shipbuilder’s major creditor banks, the Korea Development Bank, the Export Import Bank of Korea, Woori Bank, NongHyup Bank, Korea Exchange Bank, and Shinhan Bank,” Moody’s Investors Service said in a report.
“This development is also negative because it points to weaker asset quality and increasing credit costs, even though the banks have curtailed lending to the shipbuilding and shipping sector,” it added.
These six banks’ credit exposure to STX Group and its shipbuilder subsidiary amount to 12 trillion won, according to the global credit analyst.
Financial regulators are expected to grade the companies whose credits they are evaluating by the end of June, and list the ones for debt restructuring programs, while others would be forced to close down their businesses.
Companies that received low grades by financial authorities are expected to either go through a debt workout program led by their creditors, or be put under court receivership for management normalization.
There were eight industrial groups that agreed with creditors and financial regulators to improve their finances in 2010, followed by six groups both in 2011 and last year.
By Park Hyong-ki (
hkp@heraldcorp.com)
