17 commercial lenders, 4 state-run financial entities outline measures to preempt corporate defaults

A team of public-private entities have launched a financial assistance package to accelerate the restructuring of the petrochemical sector, in a move to improve national competitiveness amid a global supply glut, market watchers said Tuesday.

Central to the coordinated efforts are attempts to salvage viable firms before they default, preventing systemic spillover into the chemical industry and the broader financial sectors.

The once-booming manufacturing industry was one of the country's key growth drivers, but is now undergoing seismic challenges due to the global drive towards carbon-neutrality and loss of competitive edge due to cheaper goods from China.

There is considerable skepticism, however, since the industry has yet to come up with measures to reduce carbon emissions.

Banks remain concerned about their deteriorating asset quality, brought on by the expanded financial assistance, a cause for regulatory penalties. Financial regulators say the regulatory standards will be eased accordingly.

According to the Financial Services Commission (FSC), 17 banks and four state-run entities, including Korea Development Bank, Korea Trade Insurance Corp. and Korea Credit Guarantee Fund, signed an agreement to establish a joint restructuring plan.

They plan to extend loan maturity, defer interest payments, lower interest rates and limit demands for additional collateral.

A council of creditors will outline an industry-wide protocol to evaluate and assist distressed-yet-viable market players, once the companies receive approval of more than 75 percent of the council.

Korea Federation of Banks (KFB) Chairman Cho Yong-byoung said the industry is under serious pressure from global oversupply and structural decline.

"The agreement offers viable firms a lifeline before their financial distress becomes irreversible," he said during a meeting with the FSC and the banks at the KFB. "This will accelerate government-led restructuring efforts, with the assistance of the financial sector. This meaningful measure will help them implement self-rescue efforts, leading to a win-win outcome for both the financial sector and industry."

FSC Vice Chair Kwon Dae-young said the measures are not just a support plan but a framework for proactive restructuring.

"The industry will serve as the first test case of government-led restructuring in the country's key growth driver industries. We urge firms to promptly submit concrete and realistic restructuring plans," he said.

Gov't, banks launch petrochemical restructuring drive amid oversupply issues - The Korea Times