By Yoon Ja-young
Lenders, subcontractors and investors are expected to sustain some 1.1 trillion won in losses due to Keangnam Enterprises, a construction company at the center of a recent bribery scandal.
The company, which was founded in 1951, has been making headlines since its chairman, Sung Woan-jong, committed suicide two weeks ago, leaving a list of politicians he claimed to have bribed. On the list were close aides to President Park Geun-hye, including Prime Minister Lee Wan-koo, who has offered to resign. Sung was being investigated for alleged corruption in the "energy diplomacy" of administration of former President Lee Myung-bak.
According to financial industry sources, 17 banks and non-bank lenders have exposure to Keangnam. Among them, the state-run Export-Import Bank of Korea sustained the biggest loss as Keangnam has 520.8 billion won in debt with the bank. Shinhan Bank lent 176.1 billion won, and Korea Development Bank (KDB), Nonghyup and Suhyup have more than 50 billion won in loans each.
Keangnam also borrowed a total of 11.8 billion won from Woori Investment Bank, SBI Savings Bank and KT Capital; and 23.5 billion won from Daewoo Securities and Yuanta Securities.
Of the 1.35 trillion won in loans provided by 17 lenders, 740 billion won will not be retrievable as they are loans without collateral.
Lee Ji-eun, a senior research fellow at the Korea Institute of Finance, said there should be more thorough monitoring and restructuring of businesses that are chronically insolvent.
"The ratio of delinquent companies with low profitability is rising," he said. "As these companies are getting more loans, they could trigger risks in the financial industry."
Some banks, including Export-Import Bank of Korea, Shinhan, KDB, Suhyup and Nonghyup, sustained 75 billion won in losses from the Keangnam shares they had been holding due to a debt-equity swap.
The company was delisted last week because losses had wiped out its equity capital.
About 7,900 small investors who hold Keangnam shares have sustained 35 billion won in losses due to the delisting.
Subcontractors of Keangnam, totaling more than 1,600, are also expected to sustain losses, considering that only 30 percent of the bonds are retrievable, on average, once a business enters court receivership. It means they will lose about 250 billion won out of the 356 billion won Keangnam owes them.
As creditors of Keangnam rejected the company's request for additional financial support, the Seoul Central District Court determined that it should go under court receivership.
Concern is also increasing that some of the Keangnam subcontractors may go bankrupt.
Lenders, subcontractors and investors are expected to sustain some 1.1 trillion won in losses due to Keangnam Enterprises, a construction company at the center of a recent bribery scandal.
The company, which was founded in 1951, has been making headlines since its chairman, Sung Woan-jong, committed suicide two weeks ago, leaving a list of politicians he claimed to have bribed. On the list were close aides to President Park Geun-hye, including Prime Minister Lee Wan-koo, who has offered to resign. Sung was being investigated for alleged corruption in the "energy diplomacy" of administration of former President Lee Myung-bak.
According to financial industry sources, 17 banks and non-bank lenders have exposure to Keangnam. Among them, the state-run Export-Import Bank of Korea sustained the biggest loss as Keangnam has 520.8 billion won in debt with the bank. Shinhan Bank lent 176.1 billion won, and Korea Development Bank (KDB), Nonghyup and Suhyup have more than 50 billion won in loans each.
Keangnam also borrowed a total of 11.8 billion won from Woori Investment Bank, SBI Savings Bank and KT Capital; and 23.5 billion won from Daewoo Securities and Yuanta Securities.
Of the 1.35 trillion won in loans provided by 17 lenders, 740 billion won will not be retrievable as they are loans without collateral.
Lee Ji-eun, a senior research fellow at the Korea Institute of Finance, said there should be more thorough monitoring and restructuring of businesses that are chronically insolvent.
"The ratio of delinquent companies with low profitability is rising," he said. "As these companies are getting more loans, they could trigger risks in the financial industry."
Some banks, including Export-Import Bank of Korea, Shinhan, KDB, Suhyup and Nonghyup, sustained 75 billion won in losses from the Keangnam shares they had been holding due to a debt-equity swap.
The company was delisted last week because losses had wiped out its equity capital.
About 7,900 small investors who hold Keangnam shares have sustained 35 billion won in losses due to the delisting.
Subcontractors of Keangnam, totaling more than 1,600, are also expected to sustain losses, considering that only 30 percent of the bonds are retrievable, on average, once a business enters court receivership. It means they will lose about 250 billion won out of the 356 billion won Keangnam owes them.
As creditors of Keangnam rejected the company's request for additional financial support, the Seoul Central District Court determined that it should go under court receivership.
Concern is also increasing that some of the Keangnam subcontractors may go bankrupt.
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