[Q&A] Eun Seong-su, Financial Services Commission Chairman, "Expecting Discussions on Support from Creditors for Ssangyong Motor"

Eun Sung-soo, Chairman of the Financial Services Commission / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kim Hyo-jin] Eun Sung-soo, Chairman of the Financial Services Commission, said on the 6th that he "expects shareholders and labor-management to work together to find a solution for normalization" in response to Mahindra Group's announcement that it is difficult to inject new capital into Ssangyong Motor.

Chairman Eun made this statement in an 'open letter' to the media regarding concerns raised from various sectors about recent financial market instability due to the novel coronavirus disease (COVID-19).

The following is a Q&A explanation related to recent issues attached by the Financial Services Commission.

▲ Mahindra Group has announced that it is difficult to inject new capital into Ssangyong Motor. Should we now consider that they are giving up on Ssangyong Motor?

= We expect shareholders and labor-management to work together to find a solution for normalization. Mahindra Group has announced plans to support with 40 billion KRW of new funds and to assist in seeking new investors, and Ssangyong Motor has expressed a strong will to steadily pursue management reform efforts for normalization. While Ssangyong Motor is making efforts for management normalization, we also expect creditors and others to discuss whether there are areas to support Ssangyong Motor’s management normalization considering its management reform efforts and financial conditions.

▲ The aviation industry is on the brink due to the worst management difficulties, yet the government is neglecting this. There are also concerns about a chain collapse of subcontractors such as in-flight meal production factories.

= The aviation industry is facing difficulties worldwide due to COVID-19. The government recognizes the seriousness of the situation. However, due to the structural characteristics of the aviation industry, which relies heavily on leasing, the debt ratio is high, so comprehensive efforts including financial support, capital expansion, and management improvement are expected to be necessary. We are monitoring the situation together with relevant ministries and policy financial institutions and are deeply discussing multifaceted and comprehensive alternatives. We will inform you of specific measures as soon as conclusions are reached.

▲ It is said that self-help efforts are necessary before supporting large corporations. Is this just an excuse because the government does not want to support large corporations? What exactly does self-help efforts mean?

= Unlike small business owners or small and medium enterprises, large corporations have market access, so it means they should make maximum efforts to raise funds from the market. Even in past corporate support programs, self-help efforts from large corporations were required. For example, during the Korea Development Bank’s rapid corporate bond underwriting system, a certain percentage of refinancing volume (e.g., 20%) was required to be repaid by the issuing company itself. In the corporate bond issuance support program (P-CBO), a portion of the issued securitized bonds (e.g., 9%) was required to be subordinated and purchased by the issuing company or others. Going forward, while operating programs, if necessary, we will adjust the methods and scope of burdens borne by large corporations.

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