Ssangyong Motor, Doosan, Korean Air, and Other Companies in Crisis... A Pivotal Week Ahead

40 Trillion Draft Fund Announcement Approaching... Companies at a Crossroads
Ssangyong Motor's Large-Scale Deficit Puts Survival at Risk
Selective Support Possible for LCC Industry
Rapid Corporate Bond Underwriting to Be Implemented by Month-End

[Asia Economy reporters Kangwook Cho and Giho Sung] Next week is expected to be a "fateful week" for companies facing management crises, including Ssangyong Motor, Doosan Heavy Industries & Construction, Korean Air, and low-cost carriers (LCCs). This is because the Period Industry Stabilization Fund and the rapid corporate bond underwriting system, which are being promoted to support damages caused by the novel coronavirus disease (COVID-19), will be fully implemented from the end of this month. In particular, Ssangyong Motor, which is on the brink of survival due to massive losses, is closely watching whether it will be included in the target of this support plan.

According to financial authorities and the financial sector on the 19th, companies eligible for the 40 trillion won-scale stabilization fund will be announced next week. In addition, detailed matters related to fund operation will be finalized and the fund is expected to be fully operational from the end of this month.

Son Byung-doo, Vice Chairman of the Financial Services Commission, said, "We will launch the Period Industry Stabilization Fund Secretariat at the Korea Development Bank within this week," adding, "We will complete the composition of the Fund Operation Deliberation Committee by next week to promptly launch the Period Industry Stabilization Fund, and ensure that loans can be executed to companies by next month."

LCCs facing the risk of collapse are highly likely to be the first to receive support from the stabilization fund. Among the seven industries originally designated for fund support?aviation, shipping, machinery, automobile, shipbuilding, power, and telecommunications?aviation and shipping were selected as the priority support targets. Some argue that structural adjustment is necessary in the overly competitive LCC industry, raising the possibility of selective support.

Other industries will be designated after the Financial Services Commission consults with the relevant ministries and coordinates with the Ministry of Economy and Finance. In particular, whether Ssangyong Motor will receive support is a matter of interest. Ssangyong Motor, whose situation has become so urgent that its audit opinion on the first-quarter earnings report was rejected, currently has the stabilization fund as its only option. Although Ssangyong Motor has not officially requested support yet, the union chairman has personally expressed the intention to apply for the stabilization fund. Ssangyong Motor recorded an operating loss of 98.6 billion won and a net loss of 193.5 billion won in the first quarter. Its current liabilities exceeded current assets by 576.7 billion won. This is the first time Ssangyong Motor has received an adverse audit opinion since it filed for corporate rehabilitation (court receivership) in 2009.

Industry insiders expect Ssangyong Motor to soon apply for the stabilization fund and request an extension of the 90 billion won loan from the Korea Development Bank, which matures in July. Ssangyong Motor's support request is expected to intensify when funding for the first-round support targets, aviation and shipping industries, is decided. The Ssangyong Motor labor-management union is hoping for a capital injection of 200 billion won through the stabilization fund.

However, it is uncertain whether Ssangyong Motor will be eligible for support due to fairness controversies. Contrary to the purpose of the stabilization fund, Ssangyong Motor has been posting losses for 13 consecutive quarters since the first quarter of 2017, well before the COVID-19 outbreak. Some predict that the government will find it difficult to remain passive. If Ssangyong Motor's crisis deepens, a large-scale chain unemployment crisis is highly likely. There is also speculation that the Korea Development Bank will provide support based on a high-intensity self-rescue plan. Ssangyong Motor is reportedly pursuing asset sales, including the Guro maintenance center, talent development center, and logistics center, to improve its financial structure.

On the 28th, companies eligible for the 5.5 trillion won-scale rapid corporate bond underwriting program will be decided. Doosan Infracore, rated BBB0, is known to have applied for rapid corporate bond underwriting for 30 billion won. Corporate bonds maturing in June include Hyundai Rotem (1.1 trillion won, BBB+ rating), Hyundai Construction Equipment (50 billion won, A- rating), Kolmar Korea (100 billion won), Pan Ocean (20 billion won), Sajo Industries (20 billion won), Moorim Paper (10 billion won), and Daewoo Construction (15 billion won). In addition, Korean Air's 200 billion won corporate bonds maturing in the second half of the year (BBB+ rating) are also likely to be purchased through this program.

The final self-rescue plan of the Doosan Group is also expected to be announced next week. Doosan Solus, Doosan Tower, Club Mow CC, Doosan Construction, and Doosan Infracore are among the assets mentioned or targeted for sale. Asset sales of subsidiaries, a capital increase of Doosan Heavy Industries & Construction, and private contributions from major shareholders are key details of the self-rescue plan.

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