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S.Korean gov't to help firms under debt workout

(Xinhua)
Updated: 2009-02-04 16:54

SEOUL -- The South Korean government decided to help local firms under debt workout programs by providing guarantees for overseas contracts and clarifying guidelines on distributing funds to troubled firms, the country's financial watchdog said on Wednesday.

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"The government plans to call for creditor banks to accelerate their due diligence on troubled firms and to help them graduate from the debt rescheduling programs as soon as possible," the Financial Services Commission (FSC) said in a statement after an economic emergency meeting presided over by President Lee Myung- bak.

According to the FSC, the government will encourage state-run banks to provide guarantees for overseas contracts of troubled companies. Also, the government will help arrange a clear guideline for creditor banks on distributing funds to shipbuilders, it added.

Local banks decided in mid-January to end financial aids to two ailing companies and to reschedule debts at 11 builders and three shipbuilders as fears over their potential defaults were prevalent in the market.

Some financial institutions have also refused to provide financial assistance, placing a heavier burden on those companies.

The restructuring move on the debt workout programs is in a bid to normalize business of small and mid-sized construction firms and ship builders, some of which are facing a severe liquidity contraction, local media said.