Six More Companies Including HMM, Hanra, and Dongwon Added to Debt-Laden 'Juchaemugyeolye'... KG and SeAH Excluded

Top 5 Major Debtor Groups: Hyundai Motor, Samsung, SK, Lotte, and LG in Order

[Asia Economy Reporter Kwangho Lee] The Financial Supervisory Service (FSS) announced on the 20th that it has selected 32 corporate groups as the main debtor groups this year, with total borrowings amounting to 1.919 trillion KRW and bank credit exposure balances exceeding 1.001 trillion KRW as of the end of last year.

Compared to the previous year's main debtor groups (28 groups), HMM, HDC, Janggeum Shipping, SM, Hanla, and Dongwon groups were newly included, while SeAH and KG groups were excluded.

According to the Banking Supervision Regulations, the FSS selects corporate groups as main debtor groups if their total borrowings and bank credit exposures exceed certain thresholds. Borrowings must be at least 0.1% of the nominal domestic gross domestic product (GDP) two years prior, and credit exposure balances must be at least 0.075% of the total bank credit exposure to corporations two years prior.

Banks are required to evaluate the financial structure of companies selected as main debtor groups, enter into financial structure improvement agreements with companies whose evaluations are insufficient, and monitor the implementation of self-rescue plans to manage credit risk.

The number of main debtor groups was 31 in 2018, decreased to 30 in 2019 and 28 in 2020, and increased to 32 this year. The threshold amount has been rising from 1.5166 trillion KRW in 2018 to 1.5745 trillion KRW in 2019 and 1.6902 trillion KRW in 2020.

The top five main debtor groups by total borrowings are Hyundai Motor, Samsung, SK, Lotte, and LG, in that order. The main creditor banks for the 32 main debtor groups are Korea Development Bank (11 groups), Woori Bank (9 groups), Shinhan Bank (5 groups), Hana Bank (4 groups), Kookmin Bank (2 groups), and SC First Bank (1 group), totaling six banks.

As of the end of April, the number of affiliated companies within the 32 main debtor groups was 5,096, an increase of 370 from the previous year. Domestic corporations numbered 1,352, up 145 from 1,207 in the same month last year, while overseas corporations numbered 3,744, an increase of 225.

By group, Samsung has 662 companies, Hanwha 552, SK 495, CJ 454, LG 424, Hyundai Motor 413, and Lotte 309. The company with the largest increase in affiliated companies last year was Hanwha, with 76 additional companies, followed by Hyundai Motor (45) and SK (25).

The FSS analyzed that the increase in overseas affiliates for Hanwha and Hyundai Motor, and SK's acquisition of domestic companies for entry into the environmental and waste management business, were the main reasons for the increase in the number of affiliated companies.

At the end of last year, the bank credit exposure balance to corporations was 144.37 trillion KRW, an increase of 110.3 trillion KRW compared to 2019. The credit exposure balance for the 32 main debtor groups alone was 255.9 trillion KRW, and total borrowings were 521.1 trillion KRW, increases of 25.9 trillion KRW and 62.2 trillion KRW respectively from the previous year.

The bank credit exposure balance and total borrowings of the top five groups at the end of last year were 127.8 trillion KRW and 300.8 trillion KRW respectively, increases of 14 trillion KRW and 30.6 trillion KRW compared to the previous year. The shares of credit exposure balance and total borrowings of the top five groups in the entire main debtor groups were approximately 49.9% and 57.7%, respectively.

An FSS official stated, "Based on the financial structure evaluation results, companies deemed to require financial structure improvement will be required to enter into agreements with their main creditor banks, and banks will regularly monitor the implementation of self-rescue plans to systematically manage the credit risk of large corporate groups."

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