Eun Sung-soo: "No Nationalization of Key Industries... Even if Shares Are Held, Voting Rights Will Not Be Exercised"

"Only to Share Profits with the People When Corporate Value Increases"

Financial Services Commission Chairman Eun Sung-soo is briefing on the contents of the '5th Emergency Economic Measures Meeting' chaired by President Moon Jae-in at the Government Seoul Office in Jongno-gu, Seoul, on the 22nd. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Yoo Byung-don] Eun Sung-soo, Chairman of the Financial Services Commission, firmly stated on the 24th that "there will be no nationalization of companies" in relation to support for key industries.

Chairman Eun said in a letter sent to experts from various fields on the same day, "The government's firm principle is to guarantee the autonomy of corporate management."

He added, "Even if we acquire equity-linked securities of key industry companies, this is only to share profits with the public when the company's value increases, and we will not exercise voting rights."

On the same day, the Korea Development Bank and the Export-Import Bank of Korea announced that they would provide new funds totaling 1.7 trillion won to Korean Air by lending 200 billion won in operating funds, acquiring asset-backed securities (ABS) worth 700 billion won issued based on cargo transportation accounts receivable, and acquiring 300 billion won in perpetual bonds with stock conversion rights. This means the two banks will secure about 10.8% of Korean Air's shares.

Earlier, on the 22nd, the government announced a corporate stabilization support plan that included the establishment of a 40 trillion won Key Industry Stabilization Fund.

The support targets seven industries facing financial difficulties due to the COVID-19 crisis: aviation, shipping, automobile, shipbuilding, machinery, electricity, and telecommunications.

However, conditions such as maintaining employment, restrictions on remuneration, dividends, and treasury stock acquisition to prevent moral hazard, and sharing of normalization profits were attached.

As an example of the profit-sharing plan upon normalization, the government proposed supporting a certain portion of the support amount (e.g., 15-20%) through equity-linked securities or redeemable convertible preferred stocks, which was actually utilized in the Korean Air support.

Chairman Eun defined these conditions as "essential measures considering the purpose of the fund."

He explained, "The fund is precisely to protect valuable jobs," and "the intention is to ensure that the support effect does not concentrate on some major shareholders but widely benefits all citizens through employment stability."

Chairman Eun also hinted that support could be extended to industries beyond the seven key industries if necessary.

He said, "We plan to focus support on the seven key industries first, but will operate flexibly considering the financial situation of each industry," adding, "Support measures such as the 135 trillion won Bond Market Stabilization Fund and Primary Collateralized Bond Obligations (P-CBO) are in place."

He explained, "The government will promptly prepare necessary procedures such as legal amendments and national guarantees," and "even before the fund is established, urgent funding needs will be addressed by utilizing resources from the Korea Development Bank or the Export-Import Bank of Korea."

This content was produced with the assistance of AI translation services.