Large firms in debt workout may be closed

Companies with a credit rating below special mention under the new asset quality classification system known as FLC (forward-looking criteria) with borrowings over 50 Billion Won will be included in the list for business closure.

The Financial Supervisory Commission Tuesday revealed that it would finalize the Financial Supervisory Service¡¯s criteria for declaring insolvent companies on Oct. 4 and notify the corresponding banks.

A high official of the Financial Supervisory Service revealed that the target companies that could be liquidated by the banks include conglomerates under court receivership, composition or workout and companies that are classified below special mention under FLC.

The official added that not all companies that are classified below special mention would be included in the list, explaining that the companies with loans, guarantees, unpaid corporate bonds and borrowings totaling 50 Billion Won would be reviewed first.

Special mention under FLC does not indicate immediate danger for recovery of loans. It indicates interest payment default for 1 to 3 months and expected drop in a company¡¯s ability to repay debts.

hcs@donga.com