Woori injects W100b to support restructuring of high-risk PF projects

Woori Financial Group, one of South Korea’s top five financial conglomerates, announced on Wednesday it created a 100 billion won ($75 million) fund to provide liquidity to the struggling real estate project financing (PF) sector.

The fund was raised through contributions from the group’s subsidiaries, with flagship Woori Bank contributing the bulk at 90 billion won. Woori Asset Management, Woori Financial Capital and Woori Investment & Securities each contributed 5 billion won, 3 billion won and 2 billion won respectively, with Woori Asset Management serving as the general partner managing the fund’s operations.

The initiative aims to expedite debt restructuring for high-risk businesses facing potential insolvency and liquidity challenges. Woori Financial Group emphasized the fund is the first from the local financial sector to provide capital to those seeking to acquire projects at risk of public and private auctions. It will also provide relief to large-scale PF projects backed by syndicated loans but facing temporary difficulties.

This latest move brings Woori’s total contribution to real estate PF sector stabilization efforts to over 200 billion won. This includes a 53.5 billion won fund established for PF normalization and a 50 billion won commitment to a government-led blind fund under Korea Asset Management Corporation.

Real estate PF loans have emerged as a significant risk to the Korean economy, exacerbated by rising interest rates and surging property prices. The country’s financial regulator reported that as of end-June, the local financial sector’s total exposure to real estate PF loans stood at 216.5 trillion won, with 9.7 percent -- or 21 trillion won -- rated as either “caution” or “at risk of insolvency," in need of restructuring or auction.

Woori Financial Group signaled its continued dedication to supporting the soft landing of the real estate PF sector and mitigating the risk of broader financial instability.

“We hope this fund will act as a catalyst for normalizing the real estate PF market, while strengthening the group’s profitability and asset management capabilities,” a Woori official stated.