South Korea to form $10.38bn fund to rehabilitate shipping and shipbuilding companies
Seoul - QNA
South Korea's government and central bank announced Wednesday that they will jointly create a 12 trillion won (US$10.38 billion) recapitalization fund to help creditor banks rehabilitate the nation's debt-stricken shipping and shipbuilding companies.
The decision was reached at a meeting of economy-related ministers after months of intensive debate within the government on how to restructure the ailing core industries, state-run Yonhap news agency reported.
The recapitalization fund includes 1 trillion won directly injected by the government into the Export-Import Bank of Korea (Korea Eximbank), another 1 trillion won provided by the Industrial Bank of Korea (IBK), and a loan of 10 trillion won extended by the Bank of Korea (BOK), the Ministry of Strategy and Finance and the Financial Services Commission (FSC) said in a joint statement.
The BOK's loan will be extended through the IBK to the fund and part of the 12 trillion won fund will be ready for use from July, the statement said. "The country's shipping and shipbuilding companies have inked heavy losses for years since the 2008 global economic crisis due to a glut of vessels, low freight rates and competition with lower-cost Chinese rivals. Whether they survive or not will be decided in the next two to three years depending on their restructuring results," Finance Minister Yoo Il-ho said in a press conference held after the ministers' meeting.
Under the guidance of their creditor banks, shipping and shipbuilding firms have cut jobs and sold non-core assets in recent years, though the companies have yet to satisfy stricter restructuring demands from their creditors.
On Wednesday, creditor banks finally approved the self-rescue plans worth a combined 10.35 trillion won presented by the country's three biggest shipbuilders, Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co., FSC Chairman Yim said.
The government estimated that 5 trillion to 8 trillion won needs to be injected into KDB and Eximbank to allow them to increase lending to shipping and shipbuilding firms.