Heavily-indebted Korean public firms pay over 9 tln won in interest

Updated : 2014-06-02 11:24

Heavily-indebted public firms pay over 9 tln won in interest

Public companies under close government monitoring for their debtproblems spent more than 9 trillion won (US$8.8 billion) last year inpaying for interest on their borrowing, a government report showedMonday.
The government has been closely monitoring 18 public companies,including housing developer LH Corp. , the power company KoreaElectric Power Corp. (KEPCO) and their power generating subsidiaries,which are struggling in the face of rising debt.
This is part of the government’s ongoing “normalization” efforts for thepublic sector, which is often criticized for lax management and pesteringdebt problems. 
According to the report by the finance ministry, the 18 publiccompanies under the government’s special monitoring paid a combined9.07 trillion won in interest last year. This amount represented 24.7 billion won every day to pay for interest.
The 18 public companies held a total of 436.1 trillion won in debt lastyear. The interest payment was made for their financial debt out of thetotal liabilities, the report showed.
Their interest payment has been rising steadily over the past few years.The 2013 payment was much higher than the 6.26 trillion won that theypaid in interest in 2009, according to the report.
KEPCO and its six power-generating subsidiaries paid a combined 2.3 trillion won in interest on their debt last year, the largest amount amongthe public companies. Korea Expressway Corp. paid 966.1 billion wonin interest last year.
Of the 18 companies, LH held the largest amount of total debt at theend of 2013, 142.3 trillion won, followed by KEPCO with 104.8 trillionwon. In terms of financial debt, LH and KEPCO also ranked first andsecond with 97.9 trillion won and 61.8 trillion won, respectively, thereport showed.
In April, the government finalized reform plans submitted by thecountry’s 295 public organizations, focusing on tackling worsening debtproblems and reducing excessive welfare programs that ignored thefinancial health of the organizations.
Under the plans, the government expected that public organizationscould reduce their debt by more than 50 trillion won over the comingyears if they carry out the reform measures they have promised.

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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