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S. Korea to create 9.5-bln-USD funds for corporate restructuring

Xinhua, June 8, 2016 Adjust font size:

South Korea announced a plan on Wednesday to create an 11 trillion-won (9.5 billion U.S. dollars) funds, financed mainly by the central bank, to help state-run banks finance corporate restructuring in financially troubled shipping and shipbuilding industries.

Finance Minister Yoo Il-ho, who doubles as deputy prime minister for economic affairs, held a meeting with economy-related ministers to strengthen industrial competitiveness, saying that the so-called capital expansion funds worth 11 trillion won will be created by the Bank of Korea (BOK)'s loans and the government's contribution.

The funds creation was aimed at tackling possible negative effects from the ongoing corporate restructuring in advance, Yoo said, noting that the government would take a lead to directly finance state-run banks before the creation of the capital expansion funds that would purchase bonds issued by state-run banks.

Following the April general elections, the government launched the corporate restructuring in shipping and shipbuilding sectors that had struggled with massive losses and falling orders caused by the prolonged slump of the global economy.

Hyundai Merchant Marine, one of the country's top two shipping firms, completed negotiations on ship-chartering fees and debt restructuring, while its arch-rival Hanjin Shipping would swiftly carry out the restructuring procedures according to the same standards and principles as Hyundai Merchant Marine, the finance minister noted.

South Korea's top three shipbuilders, including Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering, established their self-restructuring measures worth 8.4 trillion won on expectations that the global shipbuilding industry would be in troubles in the next 2-3 years, Yoo said.

The government-led corporate restructuring has been widely expected to cause massive layoffs in the cited industries that may hit the already fragile private consumption and facility investment. The BOK has been under pressures to cut the current rate of 1.5 percent, the all-time low level, further to deal with possible economic turmoil from the restructuring process. Endit