Korean government has asked financially-troubled conglomerates to sell off their assets in an effort to improve their liquidity
November 4, 2013 Leave a comment
2013-11-03 16:41
Troubled companies asked to sell off assets
By Yi Whan-woo
The government has asked financially-troubled conglomerates to sell off their assets in an effort to improve their liquidity, according to industry sources Sunday. The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) recently indicated that there will be no additional financial support for troubled firms this year. The regulators called on financially-unstable conglomerates to sell of their assets quickly instead of bargaining to receive good deals, according to industrial sources. “The authorities are especially urging firms in the shipbuilding and construction sectors to take appropriate action as a number of them are suffering from the prolonged slump in their respective industries,” a market observer said.The move comes amid rising concerns over a series of liquidity crises involving conglomerates, including Tongyang Group, the country’s 38th-ranked conglomerate which is expected to sell core assets under court supervision.
The cash-strapped group is alleged to have issued bonds and commercial papers (CPs) “fraudulently” without properly informing buyers of the risks, leading to criticism of the FSC and FSS for failing to timely manage the situation.
Dongbu Group seeks to raise 500 billion won ($471 million) by selling stakes held by its flagship construction subsidiary Dongbu Corp.
The country’s 17th-largest business group was embroiled in a dispute over its fiscal structure last month when LIG Investment and Securities claimed in a report that the group’s debt structure was similar to that of the troubled Tongyang Group.
Dongbu Group Chairman Kim Jun-ki admitted that the debt-to-asset ratio of Dongbu Steel, one of the group’s flagship affiliates, had exceeded 270 percent. However, he stressed this was largely because of investments into new businesses.
He also said the debt of the steelmaker involves no CPs, adding 76 percent of the debt is borrowed from financial institutions such as banks and the rest was in the form of corporate bonds.
Hyundai Group plans to offer new shares worth 214.5 billion won after securing 280 billion won via the sale of corporate bonds.
The financial authorities have also decided to push for the shakeup of small- and mid-sized companies facing liquidity shortages this year.
The number of smaller companies on the consolidation list to be released this month is expected to be more than 100, according to sources.
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