The fallout from a snowballing graft scandal involving businessman Sung Woan-jong and Keangnam Enterprises is hitting the builder’s creditor banks hard due to an inability to collect their debts.
The combined damage confirmed so far is estimated at about 80 billion won ($74 million) and is likely to exceed 1 trillion won once the company’s workout process is completed, according to industry analysts.
The Export-Import Bank of Korea and Shinhan Bank suffered the largest losses, with 20 billion won and 12.9 billion won, respectively, as they held shares in Keangnam due to a debt-for-equity swap carried out last year.
The per unit stock price, which was assessed as 5,000 won back then, dived to the 600 won range after the company was delisted from the equity market.
Korea Development Bank, NongHyup, and Kookmin Bank also lost 12.7 billion won, 5.7 billion won, and 5 billion won, respectively.
The total losses are expected to snowball further in the upcoming months as creditor banks still hold over 1.3 trillion won in outstanding loans, most of which is likely to remain irrecoverable.
Once a company enters court receivership, the average debt recovery rate for creditors will likely be around 20 percent, according to bank officials.
Several former and incumbent top-ranking officials are said to have met with the late Keangnam chairman Sung and may face prosecutorial questioning.
The alleged list includes Kim Jin-soo, former Financial Supervisory Service assistant vice governor, and several former chiefs of major banks.
Financial Services Commission chairman Yim Jong-yong also reportedly met Sung when he was NH NongHyup Financial Group chairman.
By Bae Hyun-jung tellme@heraldcorp.com)
