Top economic and financial officials speak about corporate restructuring.[Photo by Yoo Dae-gil = dbeorlf123@]
The fund, which will start operating from July 1 through the end of 2017, is aimed at bolstering capital at state-run policy banks so that they can facilitate corporate restructuring without any significant fall in their capital ratio, the finance ministry said.
The government will inject one trillion won directly into the Export-Import Bank of Korea (Korea Eximbank), it said.
Separately, the Bank of Korea would extend a loan of 10 trillion won through the Industrial Bank of Korea (IBK). Policy makers want the central bank to support state lenders with heavy exposure to troubled companies.
IBK will provide one trillion won additionally to raise a total amount of 11 trillion won to recapitalize Korea Eximbank and Korea Development Bank (KDB). The fund will be used to invest in contingent convertible notes, or CoCo bonds, of the two state-run policy banks.
KDP and Korea Eximbank meet BIS ratios of 13 percent, and 10.5 percent, respectively. KDB's ratio now stands at 14.6 percent and Korea Eximbank's is 9.9 percent.
The current wave of restructuring may require an injection of 11 trillion won at its worst, but the government's initial projection was about five to eight trillion won.
Financial Services Commission chairman Yim Jong-yong said the fund was bigger than calculated earlier, reflecting a government consensus that corporate restructuring should be done in a "swift, pre-emptive and complete" way.
"The fund was scaled at 11 trillion won to build a full and complete shield," he said, adding money will be funnelled first into Korea Eximbank because it has been heavily exposed to troubled loans.
South Korea's big three shipyards -- Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering -- are expected to raise a total of 10.3 trillion won through asset sales and cuts in wages and workforce, the Finance Ministry said.
The three shipyards are under massive restructuring led by creditors to reduce their debt.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
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