Korea Technology Finance Corp. gives former posts preferential treatment

Korea Technology Finance Corporation is known to have supported companies set up by its retired employees more than 13 billion won (12.29 U.S. million dollars) during the past five years. A majority of these companies had high debt ratio and deficit, and still got 40% more than the corporation`s average. This has raised speculation that a part of policy funds that should have been spent for venture companies were given to former posts as preferential treatment.

According to the "current state of technology guarantee support for former employees," which Rep. Kim Yong-tae of the leading Saenuri Party obtained from the corporation on Wednesday, it issued 13.23 billion won (12.51 million dollars) worth of guarantee certificates to 34 companies headed by its former employees from 2008 to September this year. This translates into 389 million won (367,675 dollars) per company, up 45% from average guarantee (268 million won or 347,826 dollars) granted to all companies.

A considerable number of companies granted guarantee was known to have poor capital structure. One company founded in 2011 had 200 million (189,035 dollars) equity capital but was granted 450 million won (425,331 dollars) worth of guarantee for two years. The company has remained in the deficit since foundation and debt ratio reached 2,920 percent, but was granted a guarantee this year again.

A bio company posted in the deficit for five straight years with debt ratio reaching 780 percent, but got 398 million won (367,181 dollars) of guarantee. Another company had a debt ratio of 287 percent, but got 2.74 billion won (259 million dollars) of guarantee for four times since 2009. It received 10 times the average guarantee amount of all companies.

Technological level also lagged. The Korea Technology Finance Corporation evaluates technological capability of companies that ask for guarantees and then classifies them into AAA-D grade, granting guarantee certificate accordingly. Among 34 companies, no company got a technology evaluation grade of over A. Four got a GGG grade or below, which is below median.

Consequently, a considerable amount of funds flown into companies headed by the corporations` former staff were assessed as bad asset. Six companies were designated as "troubled companies" as they failed to repay loans timely for more than three times. The guaranteed amount for these companies reached 2.23 billion won (191 million dollars), taking up 15.3 percent of guarantee granted to 34 companies. The technology finance corporation said the troubled rate is around 5 percent. Debt not serviced by these companies must be paid by the corporation within the guarantee range.

"Excessive support for companies set up by retirees is a preferential treatment," Rep. Kim said. "A careful examination of whether the technology and guarantee process met fairness should be made."

The technology finance corporation is a public institution that grants guarantee by evaluating technology level. Companies, with this certificate as collateral, gets financing from commercial banks.