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Don’t delay restructuring

Dec 11,2017
A cabinet meeting specifically aimed at upgrading our industrial competitiveness has been held for the first time since the launch of the Moon Jae-in government in May. The idea for such a meeting among the deputy prime minister for the economy, chairman of the Financial Service Commission, minister of trade, industry and energy as well as other offices related to the economy was devised in June 2016 by the Park Geun-hye administration, but a meeting was convened for the first time under the Moon administration. That suggests how little interest or will the government has on the critical subject of restructuring.

Under a belated outline for restructuring, the government will pursue corporate restructuring led by the market instead of the state, balancing financial and industry interests. The work of bailing out or turning around troubled companies will be left to creditor banks instead of state lenders and use means other than the capital markets and bankruptcy courts. For instance, state-owned banks and commercial lenders will jointly form a fund of 1 trillion won ($910 million) in the first half to buy out companies for restructuring.

The government will come up with an incentive package to promote more contributions from private equity funds to corporate restructuring. It set a new guideline on restructuring to examine whether a company should be liquidated or saved in view of the industry conditions and outlook instead of merely looking at its bottom line and financial state. The new policy is based on criticisms that more was lost by letting Hanjin Shipping go bankrupt on the basis of its debt levels and by dumping troubled companies entirely on state-owned lenders.

But too much consideration of the industrial aspect could give more excuses to delay restructuring. The government said it would listen to opinions of all parties. But no one — shareholders, creditors and employees — is happy to agree to restructuring. The government said it will decide on actions on troubled mid-sized shipbuilders after it received a consultancy report. That too could be interpreted as an intent to put off an unpopular decision because of next year’s local elections.

JoongAng Ilbo, Dec. 9, Page 30