The creditor banks plan to review the self-restructuring plans, including restructuring and production cuts, from the petrochemical industry and conduct due diligence on individual corporations. The petrochemical sector has decided to reduce its ethylene production by up to 25%, and it is anticipated that creditor banks may demand further cuts during the due diligence process.
According to the financial sector on the 25th, the creditor banks will establish a joint agreement next month and finalize financial support plans for the top 10 petrochemical corporations. After that, they will receive self-restructuring plans such as the reduction plans for naphtha cracker facilities (NCC) and proceed with due diligence targeting individual corporations.
Earlier, the government presented a plan for the petrochemical industry to voluntarily reduce domestic NCC production capacity by 2.7 million to 3.7 million tons. This represents 18% to 25% of the annual production capacity of 14.75 million tons. Given that the major domestic NCC production capacity is around 1 million tons, corporations will need to shut down at least one production facility. NCC is a facility that produces petrochemical raw materials such as ethylene and propylene by breaking down "naphtha," which is generated during the crude oil refining process.
The financial authorities and creditor banks have agreed to provide financial support through agreements when the major shareholders' self-restructuring efforts and business reorganization plans are deemed feasible. During the due diligence process, creditor banks are expected to request additional measures to supplement the self-restructuring plans, such as further production capacity reductions, if the content of the plans is insufficient.
A spokesperson from a commercial bank said, "Since the government did not set specific reduction targets for each corporation, it is unclear how much reduction targets corporations will set in their self-restructuring plans." He noted, "Although financial support under the voluntary agreement is not mandatory, it has been established that if the self-restructuring plans are insufficient, such as production capacity cuts, they will require supplementation or will not provide support."
The creditor banks are also continuing discussions on the methods of support. Currently, they are seriously considering an option that extends the loan maturity without interest rate changes if 75% of the creditor banks agree. In cases where corporations are pursuing industry transformation, there is also consideration of providing policy funds from the Industrial Bank. It has been reported that the petrochemical industry is seeking interest adjustments or principal reductions, but the financial sector remains somewhat negative. They have decided to refrain from recovering existing loans as much as possible until the self-restructuring plans are finalized.