The financial sector signed a voluntary agreement to support liquidity for petrochemical corporations that are accelerating restructuring such as facility consolidation and closures. The key measures include not only extending loan maturities, deferring interest, and adjusting interest rates, but also injecting new funds.
The Korea Federation of Banks held an "industry restructuring support financial sector agreement ceremony" on the 30th at the Bankers Association Building in Seoul with creditor financial institutions that have lent to petrochemical corporations. Seventeen banks attended, along with policy finance institutions such as the Korea Credit Guarantee Fund (KODIT), Korea Technology Finance Corporation (KOTEC), Korea Trade Insurance Corporation, and Korea Asset Management Corporation (KAMCO), as well as the Financial Services Commission and the Financial Supervisory Service.
A voluntary agreement, unlike a workout under the Corporate Restructuring Promotion Act, has no legal binding force, but it allows wide latitude for creditors and corporations to decide and does not undermine a corporation's external creditworthiness. According to the financial sector, the total credit borrowed from banks by Korea's 11 major petrochemical corporations stood at 32.8 trillion won as of the end of June this year. Hanwha Solutions had the most at 8,477.4 billion won, followed by LOTTE Chemical (7,092.7 billion won), S-OIL (4,207.7 billion won), and DL Chemical (2,995.2 billion won).
When a petrochemical corporation applies for restructuring support, the lead creditor bank convenes a voluntary council of creditor banks that hold claims on the corporation. Specific support for each corporation is decided at the council and requires the consent of at least three-fourths of the creditors by claim amount. After reviewing effectiveness and validity through a joint external due diligence, the main measures include extending loan maturities, deferring interest, adjusting interest rates, and injecting new funds.
Vice Chairman Kwon Dae-young said, "This agreement means that we have established the 'framework' for preemptive business reorganization," adding, "The petrochemical industry will be the first case." However, he noted, "The specific plans to achieve the reduction targets presented by the petrochemical sector are still insufficient," and said, "Promptly draw up a concrete blueprint so that the market's doubts about the petrochemical industry can be dispelled and the corporations' commitment and execution capacity can be verified."
To provide more proactive support, the banking sector proposed allowing the asset soundness classification to be upgraded for claims where maturity extensions and interest rate adjustments are made under the agreement. The financial authorities said that for sound corporations, since the measures are pursued to improve profitability on the premise of thorough self-help efforts by the corporations and their major shareholders, the asset soundness classification can be upgraded under the banking supervision regulations.