Poor-performing PF companies to be restructured

The financial authorities will restructure poor-performing real estate project finance (PF) companies worth up to 23 trillion won to ensure the soft landing of the PF market. On the private sector side, banks and insurance companies will set up a syndicated loan of one trillion won to provide funds for the restructuring of ‘zombie’ companies. In contrast, on the public sector side, the Korea Asset Management Corporation’s fund will be given a preference for preemption to strengthen funds implementation capability.

On Monday, in cooperation with relevant organizations, the Financial Services Commission and the Financial Supervisory Service announced future policy directions for the orderly soft landing of the real estate PF. The key to the announcement is to assess PF companies by reinforcing business feasibility assessment and rapidly restructuring and organizing poor-performing companies.

The financial authorities added one tier to the existing PF business feasibility eval‎uation grades, from the existing three grades (good – moderate – deterioration concern) to four grades (good – moderate – attention required – poor performance concern). If a company is categorized as having a poor performance concern grade, which is the lowest, it needs to have an appropriation fund equivalent to 75 percent of its loans, which practically induces the auction or public auction of the business.

It is estimated that companies subject to restructuring, which are the ones in the attention required or poor performance concern grade, account for five to ten percent of the total. Given the overall real estate PF market at the end of last year, it is about 10 trillion won.

The private and public sectors will provide the necessary funds to companies with insufficient business feasibility. The Korea Asset Management Corporation’s fund will be given a preemption preference to offer an opportunity for a financial company that sold PF bonds to repurchase later. As for the private sector, banks and insurance companies will set up a syndicated loan worth one trillion won to help PF businesses that conduct auctions and public auctions purchase bonds and provide temporary liquidity.


정순구 기자 soon9@donga.com