Shipbuilding, Construction Firms Targeted for Restructuring
By Kim Tae-gyu
Staff Reporter
Struggling shipbuilding and construction companies will face liquidation or substantial downsizing next month with the government ready to take drastic measures.
According to the Financial Supervisory Services (FSS), Tuesday, 26 medium-sized shipyards and constructors whose debts are over 50 billion won ($37 million) are the first targets for restructuring.
``A seven-member task force will come up with guidelines this year, under which creditor banks will be able to screen non-viable outfits among mid-sized shipbuilders and construction firms,'' FSS Governor Kim Jong-chang said.
``Those who get the worst rating from banks will face restructuring. Thus far, we have focused on how to support companies but down the road, non-viable firms will be picked for sure,'' Kim said.
The FSS will generate criteria while banks will apply them to pinpoint those destined to fold. As a result, some construction companies and shipyards could be forced to exit the market next month at the earliest.
Kim hinted that manufacturers of automobiles and semiconductors, which are slumping amid the global financial distress, might be next on the corporate restructuring roadmap.
``In our view, automobile producers and chipmakers are fine right now. We don't think we must step up at the moment to spearhead reconfiguration of the industries,'' Kim said.
``If things get worse, however, we plan to employ both supportive and restructuring measures depending on the financial health of each company in those industries.''
Early this month, the FSS already made it clear that the financial regulator would encourage creditors to accelerate the downsizing of ailing businesses.
But this is the first time the FSS has specified what industries should be brought under the microscope. Kim said, ``We hope that these measures will weed out anxieties and uncertainties from the market.''
Asked about whether the FSS intends to ease mortgage-related regulations such as the loan-to-value ratio (LTV) and the debt-to-income ratio (DTI), Kim said the FSS has no immediate plan to review them.
The LTV refers to a percentage of the outstanding debt on real estate to its market value. The DTI measures what portion of a homeowner's monthly income is used to pay off debts. Both decide the maximum mortgage borrowers can have from financial institutions.
Over the past several years, the government has strengthened the ratios in order to cool down real estate speculation.
Experts point out those steps helped prevent the bubble in the real estate market from becoming too big. But critics claim that they are responsible for chilling investor sentiment on the property market right now.