With the first case of a petrochemical corporations restructuring expected by the end of the year, creditor financial institutions are forming a standing council and moving into a full-scale financial support regime. The creditors will verify not only the business reorganization plans of corporations requesting financial support, but also controlling shareholder support measures, plans to manage debts held by non-creditor institutions, and liability reduction plans after the business reorganization.
According to the financial sector on the 20th, the creditor institutions that will support restructuring in the petrochemical industry have formed a Standing Council for Structural Innovation Support, joined by each institution's chief executive officer (CEO). The creditor institutions include 17 banks such as Industrial, NH, Shinhan, Woori, Hana and KB, and four policy finance institutions such as Korea Credit Guarantee Fund (KODIT), Korea Technology Finance Corporation (KOTEC), Korea Trade Insurance Corporation (K-SURE) and Korea Asset Management Corporation (KAMCO).
As HD Hyundai Chemical and LOTTE Chemical submitted draft business reorganization plans to the government and petrochemical restructuring gathered pace, creditor institutions also went into preparation mode. HD Hyundai Chemical and LOTTE Chemical are coordinating a business reorganization plan centered on consolidating and integrating the two companies' petrochemical facilities.
The creditors will conduct a joint external due diligence on the self-rescue plans submitted by corporations to assess the feasibility of business reorganization and decide whether to provide financial support. Financial support will in principle maintain existing terms, but extensions of maturity, interest deferment, rate adjustments and new capital injections are possible if needed. After approval by the Ministry of Trade, Industry and Energy, the process will move into full-scale support procedures.
In the due diligence on the self-rescue plan, the creditors decided to focus on verifying the corporations' business reorganization plans and progress. They will receive and review data such as the corporations' sales over the past three years, materials and supplies procurement status, financial statements and key production facilities. The business reorganization plan will be reviewed comprehensively, taking into account the characteristics, growth potential and competitive environment of the industry, as well as year-by-year implementation plans for the business in question. The plan will also be reviewed by category: government approval completed, filed or not approved.
The self-rescue plan must include concrete execution measures such as year-by-year asset sales and fixed-cost reductions. Support measures, such as lending or capital infusion by the parent company or controlling shareholders, are also subject to review. The creditors' position is that financial support is possible only if there is funding support from the parent company or controlling shareholders. Corporations may ask the creditors for a grace period on loan repayments, maturity extensions and reductions in the interest rate. Each request must be accompanied by a specific explanation.
Because domestic financial institutions are leading this round of financial support, corporations must also submit response plans for bonds such as overseas financial institutions' loans and public or private corporate bonds. This is to prevent creditor support funds from being used to repay loans from overseas financial companies or corporate bonds. To receive creditor financial support, corporations are expected to prepare measures such as extending the maturity of corporate bonds or loans coming due, or repaying only a portion.
If requesting new funding support, they must also disclose concrete business transition plans, such as facility investments for shifting to new businesses. They also plan to require a specific plan for how to repay the agreement-based financial claims after the business reorganization ends.
A creditor-side official said, "We will assess the feasibility of the business reorganization plan under the principle that solid self-rescue efforts are required for financial support."