S Korean gov't to help firms under debt workout

Special Report:Global Financial Crisis

SEOUL, Feb. 4 (Chinese media) -- 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.

"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.

The real estate market of South Korea has suffered a

historic slump amid the global economic recession, which resulted in cash

squeeze among small and mid-sized construction firms. The South Korean

shipbuilding industry is also facing a sharp decline in new orders and foreign

exchange losses.