South Korea

South Korea’s central bank unexpectedly cut the benchmark interest rate to a new record low Thursday, citing growing risks to the economy including slowing global trade and the government’s push to restructure indebted companies, Bloomberg News reported. The decision to cut the seven-day repurchase rate to 1.25 percent, which was unanimous, was projected by only one of 18 economists surveyed by Bloomberg. While Goldman Sachs Group Inc. was the sole forecaster predicting a cut at this meeting, Citigroup Inc., HSBC Holdings Plc, and Nomura Holdings Inc.

South Korea will pump $9.5bn into state-run policy lenders reeling from huge losses on loans made to the beleaguered shipbuilding and shipping sectors to help them deal with further corporate distress, the Financial Times reported. Corporate restructuring has emerged as the top priority of President Park Geun-hye’s administration as losses balloon in major export industries and the country’s industrial titans struggle to stay afloat under mountains of debt and amid slowing economic growth.

A local court on Tuesday approved a filing by financially shaky STX Offshore & Shipbuilding to be put under a court-led restructuring scheme, paving the way for the shipyard to avert liquidation, The Korea Times reported. Last month, STX Shipbuilding, once the country's No. 4 shipbuilder, filed for receivership to stay afloat as its creditors decided to end a similar rehabilitation program for the shipbuilder. The shipbuilder has been under the control of its creditors since April 2013 amid a protracted slump in the shipbuilding sector.

The hot topic in Korean corporate circles today is undoubtedly the moves by the government and state-run policy banks to bail out the ailing shipbuilding and shipping companies, The Korea Herald reported. Given the importance of these sectors in Korea and their prolonged financial distress, it is understandable that the government has pushed the panic button. The process of bailing them out has been set in motion with some sort of consensus reached between the Finance Ministry and Bank of Korea. BOK Gov.

South Korea’s Hanjin Shipping Co. Ltd., is seeking to put itself under a creditor-led restructuring after a senior government official said the country’s ailing shipping firms may go into receivership if they can’t rebuild their businesses on their own, The Wall Street Journal reported. Hanjin, the world’s eighth-largest container shipping company by capacity, said in a statement late Friday that it will make an official request to turn its debt-restructuring efforts over to its creditors, led by the Korea Development Bank.

South Korea’s household debt rose to a record Won1,200tn ($973bn) at the end of last year, worsening one of the country’s biggest vulnerabilities even as the government strives to put the national mortgage stock on a more stable basis, the Financial Times reported. The country’s household debt stands at more than 160 per cent of household incomes, having risen steadily for more than three decades, and is seen as one of the economy’s weakest points.

South Korea’s Hanjin Heavy Industries & Construction (HHIC) is seeking a debt restructuring with its creditors and is expecting to post its sixth consecutive year of losses in 2015, reports said. In a regulatory filing to the stock exchange, HHIC said it faces a temporary liquidity shortage and seeks to restructure its debts with creditors under a voluntary agreement. Local media reports mentioned that HHIC is requesting its major creditor Korea Development Bank (KDB) to approve the debt restructuring plan, allowing the yard to then delay debt repayments and obtain extra funding.

Korea Asset Management Corp (KAMCO) anticipates it will continue to buy up plenty of ships from locally distressed lines next year, Splash24/7 reported. As of the end of October, the state-run debt restructuring company had purchased 35 vessels from shipping firms, including Hanjin Shipping and Hyundai Merchant Marine, for KRW505.5bn ($434m) since the 2008 financial crisis. KAMCO anticipates at least KRW100bn in ships outlay next year – all of which will be chartered back. Korean shipping lines have been among the hardest hit in the downturn.

Korean Company Sambo Motors Co. Ltd has taken control of German tuning company Carlsson, GTSpirit.com reported. The Korean company has promised further investment for the Saarland Merzig company and has sought to reassure Carlsson’s employees that their jobs are secure. Sambo was one of four bidders to made a binding offer during the insolvency process. Carlsson entered into liquidation in April this year following a poor year of sales.

Policy makers in Seoul are accelerating efforts to restructure debt-laden and unprofitable companies before an anticipated rise in U.S. interest rates and any further slowdown in China reverberates in South Korea, Bloomberg News reported. Falling exports and huge losses among some of Korea’s corporate giants have injected urgency into efforts to sell poorly performing assets and raise competitiveness. Overseas shipments have dropped every month this year, with notable weakness in sales to China.