| Korea Development Bank Chairman Lee Dong-gull drinks water during a National Assembly audit on Oct. 14. Yonhap |
By Lee Min-hyung
Korea Development Bank (KDB) Chairman Lee Dong-gull is in a growing dilemma over how to handle the corporate fallout from the COVID-19 pandemic with a growing number of local firms are asking for financial support for restructuring.
The aviation industry has been hit hardest by the global pandemic. Korean Air, the nation's largest carrier, recently announced its plan to place 390 foreign pilots on unpaid leave for three months due to the global spread of the virus forcing the firm to reduce capacity on international and domestic routes by 90 percent.
Things are worse for Asiana Airlines, the second-biggest carrier, which a consortium led by Hyundai Development Company (HDC) received a license to acquire. But the takeover process hit a snag with the airliner facing its worst-ever crisis sparked by the virus. HDC is expected to delay legal procedures for finalizing the deal to the latter half of this year.
The KDB is the main creditor bank and is willing to offer financial aid if HDC makes specific requests to close the deal. The HDC-led consortium was named as the preferred bidder for the acquisition of Asiana in November, but the airliner's stock price has since more than halved in the aftermath of the pandemic. HDC signed the deal for 2.5 trillion won, which is three times the current market value.
Last week, the lender gave financial support of 70 billion won to the nation's low-cost carriers, including Eastar Jet, whose operations have been suspended due to the pandemic.
The pandemic has cast a wider-than-expected impact on every local industry, pushing other cash-strapped companies into the corner.
SsangYong Motor, which has suffered decade-long financial setbacks, is in a crisis over its future after controlling shareholder Mahindra & Mahindra, a carmaker based in India, announced Sunday it would not inject funding into the cash-strapped unit. SsangYong Motor reported a 289.1 billion won operating loss in 2019.
Earlier this year, Mahindra's Managing Director Pawan Kumar Goenka met with the KDB chief and shared his plan to invest 230 billion won into SsangYong Motor. But the Indian automaker cancelled the plan during a board of directors meeting Friday.
Without the financial support, SsangYong will go bankrupt in three months during which time the company has to pay back loans worth 90 billion won to the KDB. In December last year, the lender allowed the automaker to delay making loan payments worth 20 billion won.
For now, the KDB is not considering a roll-over to the ill-fated automaker. The lender has said it will help the company only after the major shareholder takes corresponding steps.
Lee also expressed this firm determination in a recent media interview that the state-run lender will not provide any financial support unless the owner firm makes a move, saying that any "unilateral support" by KDB will never take place.
With such companies showing little sign of self-recovery in the near future, all eyes are on how the KDB leader will handle the mounting call for financial support from the local companies in dire need.
It is realistically impossible for the state-run bank to help relieve all the financial burden from the firms, due to lingering criticism that the government-led financial aid is in part a move wasting taxpayers' money at a time when the support does not fundamentally enhance their industrial competitiveness.
The KDB injected 22.55 trillion won in corporate restructuring over the past decade until October 2019, but only retrieved 30 percent of this.
Another lingering controversy is the state-run bank being swayed by political influence when providing support to certain companies.
An official from the lender said the KDB will stick to its detailed policy guideline before making decisions over such matters.
"We place an emphasis on whether a company can survive independently by analyzing their financial status before providing any financial support for restructuring," a KDB official said.
"To be more specific, we also check whether their major shareholders are willing to take responsible steps to help save their cash-strapped units, without which we will not provide financial support."