Land-Housing Corp. Seeks to Cut Massive Debt

Korea Land and Housing Corp.’s debt is equivalent to a third of the national debt of 366 trillion won (323.3 billion U.S. dollars), and the state-run company pays 7.4 billion won (6.5 million dollars) in interest every day.

To minimize its debt, the corporation will sell assets worth 30 trillion won (26.5 billion dollars), including land and houses.

The government has asked other state-owned companies with high debt such as Korea Electric Power Corp. and Korea Expressway Corp. to devise plans to reduce their red figures by late next month.

Given the government drive to reduce the “shadow national debt” including those of the public sector, major state-owned companies are expected to sell assets and take advantage of idle properties.

The Land, Transport and Maritime Affairs Ministry and the housing corporation will retrieve investment of more than 20 trillion won (17.7 billion dollars) ahead of time by closely examining new housing stock in Korea that remains unsold and selling them at cheap prices.

Areas on the list include the Dongtan 2 district in Hwaseong, Gyeonggi Province, worth 2.4 trillion won (2.1 billion dollars), Unjeong district in Paju, Gyeonggi Province, worth 1.5 trillion won (1.3 billion dollars), and Cheongna district in Incheon worth 700 billion won (618.4 million dollars).

An additional debt reduction of 10 trillion won (8.8 billion dollars) over the next three years will come through cutting construction costs, improving business value, and implementing land compensation.

The housing corporation formed early this year a committee for improving the company’s financial condition. The committee has analyzed the state and cause of the company’s debts and suggested a report on debt reduction measures.

The company’s debt reached 109 trillion won (96.3 billion dollars), equal to 30 percent of the national debt, late last year. The figure was 86 trillion won (76 billion dollars) in 2008, more than the combined debt of 83 trillion won (73.3 billion dollars) of the electric power and expressway corporations, Korea Gas Corp., Korea Rail Network Authority, and Korea Railroad.

The housing corporation also divided projects pursued by headquarters and regional offices into five steps: complex and housing planning, compensation, construction and completion. It is urging its regional offices to get approval from headquarters before spending above a predetermined amount.

Moreover, it will sell the buildings of headquarters and 10 regional centers earlier than scheduled, negotiate with government agencies to extend the deadline for payment of the national housing fund, and ask for more state support for rental houses.

Other large state-owned companies such as those for electric power, gas, rail and expressways have also struggled to reduce their debts. The power corporation, which has the second-most assets following the housing company (excluding state-owned financial companies), will repay debt by generating profit through a project to develop real estate worth 3.5 trillion won (3.1 billion dollars).

jarrett@donga.com turtle@donga.com