Corporate workout system will remain

The government has decided to rectify the entire plan regarding the corporate workout system, which had been slated to be discontinued at the end of this year, so that it is enforced for one to two years, even beyond next year. As a result, even faltering corporations that have not reached an agreement with creditors can immediately enter into the workout program without receiving legal management or running into insolvency.

The Financial Supervisory Commission (FSC) held a party council meeting August 21 with the Millennium Democratic Party and agreed to make such reforms to the workout system.

"Although it had been planned to replace the workout system by the pre-package bankruptcy system starting next year, as it is difficult to settle the influences of bankruptcies of large-scale corporations with this system, we have decided to have the workout system remain even after next year,¡± a source at the FSC said.

The Financial Supervisory Service (FSS) says that returning to the old system now is impractical.

"The prior regulation system being prepared by the Ministry of Finance and Economy requires an agreement by 50 percent or more of the credit finance organizations in order to materialize a debt freeze, but it takes too much time for a corporation facing bankruptcy to obtain the agreement with the creditors and, therefore, there are many limitations for actual operation," the service stated.

Consequently, the workout system will remain as it is even after next year, so it is forecast that cases of new designations as workout corporations will occur frequently.

The FSS said, however, that among the corporations for which a workout is presently in progress, those corporations that can normalize management will graduate this year. Yet for the corporations whose revival is difficult, the workout program will be stopped, and the companies will be put under court receivership or the prior regulation system, and then made to go through liquidation.

In the case of corporations that have decided to voluntarily pursue workouts with their creditors, the workout agreements, which had been made at the Corporate Restructuring Coordination Committee, will be carried out as is they were memorandum of understanding.

Out of the 104 companies selected as candidates for workouts since 1998, there are 46 companies, 12 of which are Daewoo Group affiliates, presently undergoing the program.