Sunday, January 18, 2009
S.Korea: No builder, shipyard picked for removal
Sunday, 18 January 2009
Not a single company has received the insolvent D-grade in the credit banks' risk assessment of 92 construction firms and 19 shipbuilders, sources at the country's financial watchdog reported yesterday. The sources at the Financial Supervisory Service said that there are two to three shipbuilders and 12 to 14 construction firms falling into "possible insolvency (C-grade)" category, far smaller numbers than analysts had expected.
Although the assessment by Woori Bank, the main creditor of 30 construction companies, are still going on, the number of companies to be forced out of the market is estimated to be less than three at the most, the sources said.
Two to three shipbuilders received C-grade rating, according to the creditor banks, with none received D-grade out of the 19 companies.
"If a company is sentenced to shut down through assessment, its creditor bank will also suffer from the increase in non-performing loans," a source at a bank said, explaining the reason creditors are reluctant to get tough on the evaluation.
Officials said the FSS, frustrated with the result, told creditor banks on Thursday to put more companies into the C-grade category.
"Restructuring of the construction and shipbuilding companies is meaningful because it would set the direction for other industries," Kim Yong-hwan, senior deputy governor of the FSS, said on Thursday during the meeting with the heads of seven major creditor banks.
"The burdens will eventually be borne by the banks if they are not tough enough on the restructuring," he said.
"A few B-grade companies can be freshly labeled "possible insolvency (C-grade)," consequently, a source at a creditor bank was quoted as saying by Yonhap News.
Another source at another bank, however, said that the request is making the evaluation more difficult. "I'm doing my best to be as objective as possible, but it seems like putting more companies into the C-grade is impossible," he said.
The banks are accordingly reworking on the scores of the companies whose scores are bordered between B and C to remove around four -- two constructors and two shipyards -- to the "possible insolvency" list.
The finalization of the evaluation, which was originally scheduled to be completed and submitted to the financial authorities by today, is expected to be further delayed.
Earlier this month, security companies predicted that about 20 percent of the 111 companies to receive C-grade or lower. Korea Investors Service, a Seoul-based credit rating agency and an affiliate of Moody's Investors Service, estimated yesterday that 16 construction companies of the country to be either restructured or closed down, based on its credit risk evaluation of 94 major construction firms excluding those "heavy industries" companies specialized more in shipbuilding business, such as Hyundai Heavy Industries and Doosan Heavy Industries & Construction.
"With non-financial factors taking up about 60 percent of the criteria for the evaluation, the evaluation result can face disagreements of the related companies," Kim Byoung-jin, senior analyst at Korea Investment Service, warned in a recent press release.
Source: Korea Herald
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