Local banks to widen scope of corporate overhaul

SEOUL, Jan. 29 (Yonhap) -- South Korean banks will likely expand their corporate
revamp into almost all sectors of the economy by June in a bid to head off
potentially crippling defaults, financial sources said Thursday.
Last week, local banks decided to end support to two ailing companies and
reschedule debts at 11 builders and three shipbuilders facing a liquidity squeeze
amid the slowing economy.
According to sources, local lenders plan to review the credit risks of companies
that owe over 5 billion won (US$3.63 million) to creditors starting in March when
their balance sheets for 2008 will come out.
Banks plan to check companies' interest coverage ratios, a gauge of their ability
to pay out interest with operating profit, and asset soundness by around April
and will look into other financial details and business risks beginning in May,
sources said.
Market watchers said the move will likely increase the number of candidates for
corporate restructuring, given that the South Korean economy has been quickly
losing steam since late last year, hit by the U.S.-sparked global financial
turmoil.
Asia's fourth-largest economy shrank 5.6 percent last quarter from three months
earlier, the sharpest fall since the Asian financial crisis a decade ago, due to
faltering exports and sluggish domestic demand.
The government is beefing up its monitoring of local auto parts suppliers and
shippers, which analysts say could become the next targets for the overhaul.
The restructuring drive for local builders and shipbuilders is part of a
government-led drive to ensure the supply of much-needed funds to viable
companies and prevent delays in corporate revamps from weighing on the local
economy.
sooyeon@yna.co.kr
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