South Korean govt urged to liquidate 49 companies

South Korean govt urged to liquidate 49 companies

SEOUL (Reuters): South Korean banks have recommended 49 more companies for liquidation, sale and merger in the latest move aimed at spurring corporate restructuring.

However, analysts say the government is dragging its feet on corporate reform, in part because of the economy's unexpectedly sharp economic slowdown.

The Financial Supervisory Commission (FSC) did not identify the companies which would lose financial support from creditors, saying revealing the names would hurt their chances of surviving on their own.

The disclosure was part of a review of 1,544 firms by 22 banks, which are scheduled to complete their credit evaluation by the end of September. So far, the future of 546 companies has been decided, the FSC said.

Analysts were not impressed by the latest announcement.

"The direction is right, but it's nothing really significant," said Park Yong-sun, a market analyst at SK Securities Co. "Banks and the government should be more aggressive in the restructuring of real trouble makers."

Creditors had still not decided about how to deal with "bigger and more problematic" companies, whose failure could deal a serious blow to the slowing economy, an FSC official said.

Critics say that as Korea braces for its second-worst economic performance in 21 years, the government, mindful of dampened corporate activity, is less willing to push corporate reform.

The government intervened in the rescue of troubled Hynix Semiconductor and Hyundai Engineering & Construction, while sales of weakened companies including Daewoo Motor and SeoulBank have been in limbo.

Korea's economic growth is expected to slow to about four percent this year after a blistering 8.8 percent expansion in 2000, the Finance Ministry said.

But an FSC official said the government was still strongly behind the corporate reform effort.

"The government is determined to continue the restructuring to regain international confidence," said Kim Young-dae, head of the FSC's credit supervision team.

Last month, creditors selected 25 companies which were likely to fail to cover debt interest payments using operating profits, for liquidation, sale and merger, but also did not identify them.

The decision to keep their identities secret has led to skepticism about what would actually become of them.

The screening process was part of the Korean government's pledge to undertake substantial corporate reforms when it accepted a $58.35 billion international bailout to avoid national bankruptcy in late 1997.

The announcement prompted little market reaction. The benchmark Kospi was up around 1.5 percent by 0345 GMT (10.45 p.m. Jakarta time), but this was attributed to a rise in chip stocks and buying of construction, banks and brokerage stocks on expectations for monetary easing and government pump-priming.