Fresh fund injection into Woobang rejected

Creditors decided on Monday not to provide additional aid funds to Woobang Housing & Construction, which is under a workout program. This is the first case in which creditors refused to provide additional aid funds to a workout company and is taken as a signal of the government¡¯s emphasis on liquidating insolvent workout companies. Consequently, Woobang is likely to come under court receivership if it fails to cover the maturing notes on its own and defaults.

Background information for the refusal of aid funds: Seoul bank, which is the main creditor bank of Woobang, held a creditors¡¯ meeting with 22 creditor financial institutions and voted on the provision of an additional 110.7 billion won, and only 54.8% voted in favor. Woobang needed more than 75% of the vote in order to receive the additional aid funds. An official of Seoul bank explained that the cost of sales for Woobang far exceeds the sales as discovered in an audit by an accounting firm. He asserted that Woobang will incur more losses if it continues operations and the creditors concluded that it was unlikely Woobang would be able to turn a profit.

Woobang showed a possibility for viability in March when it went through the second debt restructuring by the creditors. However, its financial conditions drastically deteriorated after it faced an unexpected default towards the end of June. The creditors judged that it is better to wash their hands now and incur losses on some of their already provided funds.