Sinking Feeling for Korean Banks - Bloomberg Gadfly
▻http://www.bloomberg.com/gadfly/articles/2016-06-15/korean-banks-holed-below-the-waterline-by-shipping-debt
Now, the ship really has sailed. After kicking the can down the waterway for a few years, Korean banks will have to reckon with the debt owed by the nation’s shipbuilders, which are among the biggest in the world. They’ll need plenty of government help; probably more than has been promised.
The state has been tightening pressure on the industry to clean itself up, and restructurings are being planned. Apart from affecting thousands of jobs, the process is likely to take a toll on some of the country’s most important institutions, including state-owned Export-Import Bank of Korea and Korea Development Bank, as well as the largest private lender, Shinhan Bank. All have significant exposure to shipbuilders. Policy makers have already set up an 11 trillion won ($9.4 billion) fund to help lenders absorb losses.
They may need more. The 10 publicly traded shipbuilders alone have $38.2 billion of debt on their balance sheets, according to data compiled by Bloomberg, the vast majority in the form of loans. To put that figure into context, it’s almost as much as the $42 billion “black hole” that U.K. Chancellor of the Exchequer George Osborne says his country will face if it leaves the European Union.
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The government has said it won’t lead a consolidation, leaving shipyards to deal with their problems by negotiating with creditors. It’s not that simple, however.