S. Korea Unveils New Corporate Asset Purchase Programme

Source: Regulation Asia Editors, Regulation Asia 2020-06-15

KAMCO, a state-run distressed asset manager which was deployed during the 1997 financial crisis, will set up a special purpose vehicle to buy up corporate assets for fair market prices.

South Korea has announced a plan to employ its state-run distressed asset manager to buy up corporate assets as part of efforts to bolster businesses and stave off a liquidity crunch.

The government has already authorised over KRW 175 trillion in financial
support programmes, of which KRW 52.6 trillion has already been deployed, as of 8 June.

Besides this, cash strapped companies have been selling off assets to boost liquidity, as part of a broader strategy to restructure and improve their financial structures.

“For companies’ self-rescue efforts to be effective, asset sell-offs should take place at fair prices,” the FSC (Financial Services Commission) said. “To facilitate this, the government will set up a special purpose vehicle (SPV) at the Korea Asset Management Corporation (KAMCO) to purchase corporate assets at fair prices, stimulating private sector demand for corporate assets.”

KAMCO was also employed to help rebuild Korea’s financial and corporate sectors during the 1997 financial crisis.

Under the new programme, KRW 2 trillion will be channelled into the corporate sector through an SPV, funded by bond issuance from KAMCO, with the possibility of expanding the size of the fund through participation from the privately managed funds.

KAMCO will also seek to promote private investor participation in the asset buying programme through its operation of the Corporate Structure Innovation Support Center, an information-sharing platform that matches buyers and sellers.

The SPV will purchase assets held by companies of all sizes, though it will focus on assets that are unlikely to attract sufficient demand in the market, with input from accounting firms and external advisors to establish fair valuation standards.

KAMCO will also allow companies the option of leasing back their assets for corporate use, or buying back the assets at a later date.

The plan will be finalised this month and the asset purchases will start next month.

According to local reports, aviation and auto parts companies are likely to be among the first beneficiaries of the initiative.

KAMCO

SPV

Asset Purchase Programme

S. Korea Unveils New Corporate Asset Purchase Programme

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