SK creates W100b fund to support suppliers

SK Group said Monday that it has created a 100 billion won ($85 million) private equity fund promoting shared growth with smaller partner companies.

Unlike the group’s existing loans for suppliers, the new scheme is aimed at investing directly into competitive firms that are financial struggling, SK said.

The group said that it has received funding from Korea Finance Corporation, KDB Capital, SK Securities, SK Telecom and SK Global Chemical to set up the new private equity firm.

The fund, aimed at investing exclusively in SK’s partner firms, was established in April and completed procedures to register with the Financial Services Commission late last month.

The fund will be operated in the coming six years by 2018, with two general partners SK Securities and KDB Capital being responsible for making investment decisions.

When it comes to new investment, the fund will prioritize companies that have full growth potential but have difficulties collecting money for R&D activities or expansion of production lines.

After a review process for their qualifications, SK will make an equity investment worth about 5 billion won each into the selected companies.

According to the group, the concept of the fund started with a new shared growth model proposed by SK chairman Chey Tae-won when he held a meeting with CEOs of parts suppliers in October.

“For a real partnership with suppliers, the support should not end as a one-off measure. It should strengthen their competitiveness more fundamentally,” Chey was quoted as saying by company officials.

SK has already operated a shared growth fund worth 32.1 billion won that provides a 500 million won loan on average to partner firms.

The new private equity fund offers a larger amount of money and companies are not required to pay back the interests or provide collateral pay, the group said.

KDB Capital, one of the two general partners, also plans to offer additional financial support when necessary.

By Lee Ji-yoon (jylee@heraldcorp.com)