122 Korean SMBs to go under restructuring

122 SMBs to go under restructuring

Lee Jin-myung

2013.11.08 15:56:54

South Korea’s 112 small and mid-sized businesses (SMBs) will face restructuring. The Financial Supervisory Service (FSS) along with creditor banks conducted credit risk assessment of 1,502 SMBs with weaker financials Friday and thereby rated 54 companies as grade C, a rating reserved for companies that need workout, and 58 companies as grade D, a rating for those that need to go under court receivership or shut down business. The total number of SMBs subject to restructuring was up 15.5 percent from a year ago to the highest level unseen since 2010. The 112 companies in distress include those that have remained in red or posted times interest earned (TIE) below one, or held precautionary assets.
SMBs with grade C will enter workout programs by starting asset and debt assessment and developing plans to restore management. SMBs with grade D will salvage management on their own or file for court receivership or face business closure.
“To prevent insolvencies from spilling over into sound companies, we will provide strong support to rescue viable companies and revamp inviable companies in prompt and drastic manners,” said Cho Young-je, vice governor of the FSS.
To this end, aside from the 112 targeted companies, if companies, which are now financially sound, show signs of going insolvent and ask for loans, they will be required to strike special agreements with main creditor banks to improve financial structures in an effort to encourage them to conduct restructuring in advance. Companies that do not abide by the agreements will be denied access to additional loans and face cap on the issuance of bonds and commercial papers (CPs).
Based on the credit risk evaluation, banks should set aside a total of 573.5 billion won ($539.0 million) in provisions.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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