Tong Yang Group’s liquidity crisis is posing a new threat to mutual finance companies which hold a massive amount of bonds sold by the struggling business conglomerate
September 16, 2013 Leave a comment
Tong Yang’s liquidity crisis puts mutual finance at risk
By Lee Jin-myung
2013.09.16 14:39:50
Tong Yang Group’s liquidity crisis is posing a new threat to mutual finance companies which hold a massive amount of bonds sold by the struggling business conglomerate. South Korea’s financial authorities have already begun work to understand how much they are exposed to the risk, according to sources on Sunday. The Financial Supervisory Service estimates that 796.9 billion won ($736.3 million) corporate bonds issued by Tong Yang Group companies will mature after September and 30 to 40% of them are held by mutual cooperatives such as National Agricultural Cooperative Federation, or Nonghyup, and National Credit Union Federation of Korea, or Shinhyup. If Tong Yang Group fails to manage its situation and applies for court receivership, the mutual finance companies will not be allowed to continue claiming their credits, which will be an inevitable blow to their finance.
An official of the financial watchdog agency said 30 to 40% of troubled STX Group bonds are known to be owed by mutual finance companies and it would be the same level for the case of Tong Yang Group. Losses will have to be recognized at those mutual finance companies if Tong Yang Group ends in failure, the official said.
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