Corporate Restructuring Innovation Fund Adds 1 Trillion This Year... Establishment of 'Debt Investment Exclusive Fund'

Son Byung-du, Vice Chairman of the Financial Services Commission (Photo by Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] Financial authorities have decided to add 1 trillion won to the Corporate Restructuring Innovation Fund this year to increase the proportion of project funds and introduce a debt investment-only fund (PDF). They also plan to expand the investment target companies from mainly mid-sized and small businesses to large corporations.

On the morning of the 28th, the Financial Services Commission held a meeting on "Market-Centered Restructuring Activation" at the Corporate Restructuring Innovation Center in Seocho-gu, Seoul, chaired by Vice Chairman Son Byung-du, to discuss these measures.

The meeting was attended by contributing institutions such as KDB Industrial Bank, Korea Eximbank, Korea Asset Management Corporation (KAMCO), IBK Industrial Bank, and Korea Growth Investment Corporation (asset manager), as well as related organizations including Seoul Bankruptcy Court, Ministry of Justice, and Korea Development Credit Guarantee Fund (KODIT).

The Corporate Restructuring Innovation Fund is a fund jointly created by policy financial institutions and commercial banks to enable proactive and efficient restructuring centered on the private capital market.

The Financial Services Commission plans to increase the size of the Corporate Restructuring Innovation Fund by 1 trillion won this year, raising the total to 2.6 trillion won. This will be done by increasing the main fund contributions from government finances, KDB Industrial Bank, Korea Eximbank, KAMCO, IBK Industrial Bank, and Korea Growth Investment Corporation by 501.5 billion won, and adding 501.5 billion won from private investments.

Of the additional 1 trillion won, the Financial Services Commission plans to allocate 600 billion won to project funds to enable faster capital injection into restructuring companies. Additionally, to meet corporate borrowing needs and enable swift investment execution, a debt investment (loans, convertible bonds (CB), and bonds with warrants (BW)) PDF will be introduced. 300 billion won of the additional 1 trillion won will be used for this purpose.

At the same time, the Financial Services Commission decided to diversify investment targets. They will expand the investment target companies from mainly mid-sized and small businesses to large corporations and actively consider investing in industries outside manufacturing, such as innovative industries.

They also plan to promote joint investments in target companies in connection with other funds. Furthermore, to strengthen business structure improvement capabilities, they intend to actively encourage participation from strategic investors (SI) with high industry understanding and merger and acquisition (M&A) investment companies.

The Corporate Restructuring Innovation Fund jointly acquired Dongbu Steel with KG Group in August last year. Based on this, Dongbu Steel escaped from the workout process that had continued since 2015. In November of the same year, the fund jointly acquired the management rights of Sungdong Shipbuilding & Marine, which entered rehabilitation procedures in 2018, together with HSG Heavy Industries, concluding the restructuring.

Vice Chairman Son Byung-du diagnosed, "As many companies face management difficulties due to the novel coronavirus disease (COVID-19), restructuring demand is expected to increase as M&A investment opportunities expand through corporate asset sales."

He added, "There are limits to supporting management normalization through restructuring centered on creditor banks. Market-centered restructuring that enhances corporate value and competitiveness through abundant private funds and creativity is essential."

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