Extension of Loan Maturity and Interest Repayment Deferral... Airport Facility Usage Fees Reduced Until Year-End (Comprehensive)

Emergency Economic Central Countermeasures Headquarters Meeting

Deputy Prime Minister Hong: "COVID-19 Resurgence Intensifies Difficulties for SMEs and Small Business Owners"
Financial Sector Expresses Concerns Over Potential Defaults Due to Interest Repayment Deferrals

Additional Extension of Rent Reductions and Payment Deferrals for Commercial Facilities to Support the Aviation Industry

[Asia Economy Reporters Jo Gangwook and Joo Sangdon (Sejong)] As the novel coronavirus infection (COVID-19) resurges, difficulties faced by small and medium-sized enterprises (SMEs) and small business owners are intensifying. In response, the financial sector has decided to further extend the loan maturity extensions and interest repayment deferrals for these groups. Additionally, to mitigate damage to the aviation industry, reductions and payment deferral periods for airport facility usage fees and commercial facility rents will be extended until December. The financial sector is concerned about the possibility of defaults arising from the extended interest repayment deferrals for SMEs and small business owners.

Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki stated at the Emergency Economic Central Countermeasures Headquarters (Economic Central Headquarters) meeting held on the 27th, "Regarding the deadline for loan maturity extensions and interest repayment deferrals approaching around September, after continuous consultations with the financial sector, I understand that the financial industry has resolved to extend these measures."

Deputy Prime Minister Hong added, "Given the recent resurgence of COVID-19 and the increasing difficulties for SMEs and small business owners, the government will make full use of the remaining financial support package capacity (over 100 trillion KRW, including 12 trillion KRW for emergency management stabilization funds for small business owners) to actively support market liquidity."

Since April 1, the financial sector has been implementing at least six-month extensions of loan maturities and interest repayment deferrals for existing loans and guarantees (with repayment deadlines between April and the end of September). As of the 14th, loan maturity extensions amount to 75.8 trillion KRW (246,000 cases), and interest repayment deferrals total 1.075 trillion KRW (9,382 cases).

The government has supplied new liquidity through a financial support package totaling "175 trillion KRW + α" to overcome the COVID-19 crisis. Among this, the financial stabilization package supporting small business owners and SMEs/mid-sized companies has executed over 70% of its target amount (68 trillion KRW). For small business owners, 29 trillion KRW out of the 39 trillion KRW target has been supplied, and for SMEs and mid-sized companies, 20 trillion KRW out of 29 trillion KRW has been provided. Additionally, about 7 billion KRW was purchased through the low-credit corporate bond and commercial paper purchase facility, and the COVID-19 damage P-CBO supported 1.9 trillion KRW from May to August.

The financial sector agrees with additional support measures such as extending loan maturities amid the COVID-19 resurgence. However, concerns arise regarding the interest repayment deferrals. With loan volumes having significantly increased due to COVID-19 financial support, extending the repayment deferral once more will accumulate loan burdens during that period. This raises worries and dissatisfaction about continuing to bear the 'time bomb' loans of companies at risk of insolvency. Accordingly, banks have proposed to the government a plan to extend maturities while partially repaying interest, but it is reported that this was not accepted.

A senior official from Bank A said, "While extending loan maturities is an unavoidable measure, continuously deferring interest payments inevitably imposes a heavy burden on banks. Although the loan principal remains, interest is not forgiven but continues to accumulate, which will negatively affect not only financial institutions but, above all, borrowers."

On the 20th, the government already extended the designation period for special employment support industries such as air passenger transport to March next year. The employment retention subsidy period was also extended by 60 days (from 180 to 240 days). Following these measures, the reduction period for parking fees and landing fees for airlines and ground handling companies will be extended from the original end of August this year to the end of December (with an estimated support effect of about 29 billion KRW). Furthermore, rent reductions for commercial facilities located in airport passenger terminals (such as duty-free shops and banks) will be linked to the 'passenger decrease rate' to further expand the reduction scope (with an estimated support effect of about 430 billion KRW). The deadline for airport facility usage fee reductions will be extended from March?August to March?December, and the payment period for commercial facility rents originally due between September and February next year will be extended by an additional four months to January?June next year.

Deputy Prime Minister Hong emphasized, "In the mid to long term, we aim to establish an Aviation Industry Development Association funded by private resources such as airlines to promote projects including aircraft lease guarantees, the creation of aviation investment funds, and joint aviation fuel purchases."

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