Aid Program Likely to Exclude 7 Major Builders

Primary creditor banks that lent money to domestic construction companies have graded seven of the nation’s 100 largest banks “C” or below, a grade that renders a builder ineligible for government assistance.

Two of the seven builders are among the nation’s 20 largest, dealing a serious blow to the construction industry as well as the capital market.

The Land, Transport and Maritime Affairs Ministry and financial sources said yesterday that the primary creditors graded the top 100 builders as “A (prime),” “B (restructuring),” “C (workout)” and “D (bankruptcy)” depending on debt ratio and cash flow. Under the program, seven got grades of “C” or below.

Among the seven builders, two were among the country`s top 20 in size, four ranked between 51st and 70th, and the remaining one belonged to the bottom 30. All seven are likely to collapse since their short-term debts due within a year have surged from late last year and given their large payment guarantees for project financing loans.

More than four of the seven companies are likely to be excluded from the assistance program. Those in the program will have their bonds and loans rolled over by a year and can take out new loans. Cash-strapped companies ineligible for the program will be forced to undergo debt workout or be kicked out of the market.

In an executives’ meeting yesterday, Financial Services Commission Chairman Jun Kwang-woo said the rescue program does not seek to kick insolvent builders out of the market, but help builders improve their financial structure.

Today the Korea Federation of Banks and the creditor banks will hold a meeting in Seoul with 300 representatives from the construction sector on how the program will affect builders.

legman@donga.com jaeyuna@donga.com