Thirty-one business groups in South Korea remain on the “over-indebted” category that requires special scrutiny by their creditors, according to the financial regulator Monday.
According to data released by the Financial Supervisory Service, 31 business groups have been categorized as businesses in the main debtor group whose credit exposure each has exceeded 1.5 trillion won, as of the end of last year. They will be subject to financial structure assessment by main creditor banks, and companies found to have poor financial structures should sign an agreement with their creditors to improve financial conditions and to have their voluntary restructuring plan reviewed as part of credit risk management.
The FSS has been classifying a list of business groups every year whose credit exposure as of the end of the preceding year is equivalent to 0.075 percent or more of the industry total a year ago. The number of business groups with high credit exposure has been on a decline in recent years - from 42 in 2014, 41 in 2015, 39 in 2016, and 36 in 2017.
This year, five business groups - Sungdong Shipbuilding & Marine Engineering Co., Aju Group, E-Land Group, Halla Group, and Sungwoo Hitech Co. - have been removed from the list with high loan amount.
Aju Group managed to reduce loans after spinning off its affiliated Aju Capital Co. last year while Sungwoo Hitech, Halla Group, and E-Land Group managed to repay some loans. Sungdong Shipbuilding & Marine Engineering was excluded from the list this year as it entered into court receivership.
The aggregate debt of 31 business groups in the main debtor group category as of the end of last year was 240.6 trillion won, down 11.2 percent from 270.8 trillion won of 36 business groups in the previous year, data showed.
The FSS, meanwhile, has decided to reflect so-called owner risk in its financial structure assessment for businesses in the main debtor group as part of efforts to prevent poor management by owner families from degrading a corporate image and hurting the overall business. The decision came after a number of owner families of conglomerates including Korean Air Lines Co., LG Group, and Lotte Group disgraced corporate name and morale.
By Jin Young-tae and Lee Eun-joo
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