South Korea’s financial regulator will add qualitative factors such as the owner’s risk to credit risk evaluation of large companies from the first half of this year, heralding more companies may be placed under restructuring led by creditor banks or a court.

Large companies whose owner is judged by creditors as incapable to manage a crisis or lead an organization can be classified as those subject to restructuring although their quantitative factors such as cash flow and financial statements seem sound.

The plan announced on Wednesday reflects the government’s tougher stance toward corporate restructuring this year. Qualitative risk factors such as industry risk, commercial risk and management risk will be completely reviewed in credit risk evaluation along with financial risk.

Such evaluation criteria were established after the global financial crisis in 2008 but qualitative factors were not treated seriously.

If companies fail to meet financial and cash flow requirements in credit risk evaluation conducted by creditors and the Financial Supervisory Service, they are classified into C or D grade companies. C grade companies are subject to restructuring led by creditor banks, while D grade companies by a court.

Meanwhile, Korea Development Bank rolled out a plan on how to restructure its non-financial affiliates and shipping and shipbuilding companies.

The state-owned bank said it will sell off 36 non-financial affiliates within three years. The bank’s task force comprising of five industry and restructuring experts from the private sector will determine how the companies will be divested. The bank has put 132 companies under its authority.

The bank also said it plans to complete the sale of Hyundai Securities by the end of June after a binding bid on March 24.

The bank also said it will sell off Hanjin Shipping’s bulk carrier business worth 1.7 trillion won ($1.41 billion) and sell 400 billion won worth of new shares to fight off debt.

Regarding the future of Hanjin Heavy Industries & Construction’s Youngdo Shipyard, the bank will come up with a management restructuring plan based on due diligence that will take place next month.

By Chung Seok-woo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]