South Korea’s financial watchdog lists 30 heavily-indebted business groups

2019.06.04 14:07:01

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Thirty business groups in South Korea fall under special scrutiny by their lenders and financial watchdog for excess debt.

According to data released by the Financial Supervisory Service (FSS) on Tuesday, 30 business groups have been categorized as over-indebted firms whose liability has each exceeded 1.57 trillion won ($1.33 billion) threshold as of end of last year. It is an annual move for the FSS to name business groups with debt higher than 0.075 percent of total outstanding credit from financial institutions as over-indebted as of the end of the preceding year.

This year, data showed that the debt threshold for the business groups was 57.9 billion won higher than the previous year of 1.52 trillion won.

Dongwon and Hyundai Merchant Marine were newly added to the blacklist this year while Hankook Tire, Sinokor Merchant Marine, and Hanjin Heavy Industries & Construction were removed. Hankook Tire and Sinokor Merchant Marine managed to repay respective debt by raising operating profit and fulfilling self-rescue scheme and Hanjin Heavy Industries & Construction saw its debt shrink after shedding assets.

The number of heavily indebted business groups, meanwhile, has been on a decrease in recent years after jumping from 30 in 2013 to 42 in the following year. In 2015, 41 businesses had high credit exposure, 39 in 2016, 36 in 2017, and 31 in 2018.

The FSS said that most of the country’s business groups are included in the list as it is based on absolute debt amount. This year, top 5 over-indebted business groups were Hyundai Motor, Samsung, SK, Lotte, and LG.

The 30 business groups with high loan amount managed 4,574 companies under their arm as of end of April, up from 4,565 companies as of end of the same period last year, data showed. Among them, 1,193 companies were based in Korea and 3,381 companies overseas. The number of domestic enterprises dropped by six during the same period while that of overseas based increased by 15.

According to FSS data, Samsung Group had the most number of subsidiaries included in the over-indebted list with 689 companies, followed by CJ Group with 431 companies, Hanwha Group with 426 companies, SK Group with 414 companies, LG Group with 405 companies, Hyundai Motor Group with 358 companies, and Lotte Group with 337 companies. The number of CJ units increased by 52 this year while that of Samsung dropped by 36 and Lotte, 33 companies.

Meanwhile, total credit loans issued by financial institutions stood at 2,253.3 trillion won as of end of last year, up 7.3 percent from the end of the previous year. The debt of the 30 groups came to 237.7 trillion won, down 1.2 percent during the same period. The total debt of the top five groups reached 116.7 trillion won, up 4.9 percent during the same period, data showed.

Creditor banks, meanwhile, will evaluate the financial structures of the 30 over-indebted businesses this month and sign agreements with those groups that need pre-emptive structural improvement

By Jin Young-tae and Lee Eun-joo

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