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Seoul to form W11 tln recapitalization fund to turn around ailing core industries

All News 11:43 June 08, 2016

SEOUL, June 8 (Yonhap) -- South Korea's government and central bank announced Wednesday that they will jointly create an 11 trillion won (US$9.5 billion) recapitalization fund to help state-run banks rehabilitate the nation's debt-stricken shipping and shipbuilding companies, capping months of intensive debate on restructuring the ailing core industries.

The recapitalization fund includes 1 trillion won directly injected by the government into the Export-Import Bank of Korea (Korea Eximbank) and a loan of 10 trillion won extended by the Bank of Korea (BOK), the finance ministry and the financial regulator said in a joint statement.

The loan from the central bank will be extended through the Industrial Bank of Korea to the fund, it said.

State-run Korea Development Bank (KDB) and Korea Eximbank carry heavy exposure to Daewoo Shipbuilding & Marine Engineering Co. and other financially troubled shipbuilders, as well as financially shaky shipping lines Hanjin Shipping Co. and Hyundai Merchant Marine Co.

The country's three shipbuilders, which also include Hyundai Heavy Industries Co. and Samsung Heavy Industries Co., and the two shipping companies have cut jobs and sold off non-core assets to overcome severe industry-wide slumps amid the global economic downturn.

But years of their self-rescue efforts have yet to satisfy stricter demands by main creditor banks such as KDB and Eximbank.

"If the shipping and shipbuilding companies continue to have difficulty in putting their businesses back on track amid a prolonged slump, 5 to 8 trillion won should be (initially) funneled into the two creditor banks from the fund," the statement said.

kyongae.choi@yna.co.kr
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