S. Korea may allow PEFs to buy assets: top regulator

By Kim Soo-yeon
SEOUL, June 19 (Yonhap) -- South Korea is considering allowing private equity
funds (PEFs) to buy assets, including bad debts, in a bid to help speed up a
corporate restructuring drive, the top financial regulator said Friday.

"We intend to take steps to facilitate swift and efficient restructuring through
the capital markets," Kim Jong-chang, governor of the Financial Supervisory
Service (FSS), said in a speech at a forum with economists and foreign
correspondents.
"PEFs may be allowed to acquire assets such as real estate and non-performing
loans in addition to controlling equity stakes. Korea also may permit them to
borrow directly on their own from financial institutions."
His remarks come as South Korea steps up efforts to overhaul struggling sectors
to prevent ailing companies from defaulting and weighing on the local economy.
Bad loans are continuing to pile up amid a protracted economic slump and the
corporate revamp process, compromising local banks' financial soundness.
According to the FSS, local bank's bad debts totaled 19.3 trillion won (US$15.2
billion) as of the end of March, up from 14.7 trillion won three months earlier.
The ratio of 18 local lenders' nonperforming loans to total lending reached 1.47
percent as of end-March, up 0.33 percentage point from the previous quarter.
Kim also pledged rigorous restructuring efforts for highly-leveraged larger firms
in addition to revamping ailing construction firms, shipbuilders and shippers.
Local banks recently decided to reschedule debts or end support for 33 larger
companies. In late May, nine cash-strapped large business groups signed
agreements with banks calling for enhancing their financial health. They also
plan to assess the financial health of teetering smaller firms by the end of next
month.
sooyeon@yna.co.kr
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