‘30 Biz Groups to Face Debt Workout or Exit’

More than 30 domestic conglomerates are expected to face creditor-led corporate restructuring.

Following an assessment of their financial structure to check liquidity, the government has begun restructuring of individual conglomerates.

Financial industry sources yesterday said creditors have categorized more than 30 of 434 conglomerates with debt exceeding 50 billion won (40.2 million U.S. dollars) either as Grade C subject to debt workout or Grade D subject to exit.

Of these business groups, fewer than 10 are categorized Grade D. The new measure is the result of a general evaluation of individual companies by primary creditor and secondary creditor banks. Creditors will coordinate conflicting views between banks this week and finalize the list of those subject to corporate restructuring around Friday.

The companies that underwent the latest credit evaluation include 95 rated Grade B or higher in the first assessment of shipbuilders and builders conducted in January. As such, experts say certain large shipbuilders and builders will likely face corporate restructuring.

A source at a creditor bank said, “The Financial Supervisory Service wants the application of far more stringent evaluation standards to prevent more companies from suffering deteriorating financial situations,” adding, “Seven to nine percent of all companies assessed will likely make the list for corporate restructuring.”

The Financial Supervisory Service will inspect banks next month to check whether they properly assessed the credit risk of conglomerates, and censure the heads of banks failing to meet the standards.

Creditors have also began credit risk assessment on small and medium-size companies with five billion (4.02 million dollars) to 50 billion won (40.2 million dollars) in debt. The companies will be evaluated through late this month to determine which ones will face debt workout or closure.

A financial authority source said, “We are guiding banks to strictly evaluate small and medium-size companies, just like they do with conglomerates.”

legman@donga.com