Kamco buys real estate from troubled SMEs and leases it back to sellers to relieve their financial problems under the program launched by Financial Service Commission
Korea Asset Management Corp. (Kamco) has been taking preemptive measures for when the U.S. Federal Reserve raises the core interest rates, which analysts now expect to take place in the fourth quarter. The moves are also aimed to address the Chinese economic slowdown. The two situations have been increasing uncertainty in the international financial market, and Kamco to fall back on what it does well — restructuring.
The state-run asset management firm has been running the Sales and Lease-Back Program to buy real estate from financially troubled firms and lease it back to them to relieve their tight finances. The Financial Service Commission (FSC) kicked off the program to help SMEs in financial trouble by restructuring their business portfolios.
Kamco signed an MOU with a number of financial institutions to participate in the program with the Industrial Bank of Korea (IBK) and the Small and Medium Business Corp. (SBC) in December last year and Woori, Shinhan and KEB Hana banks in Seoul and Busan and Gyeongnam banks in Busan this year, in line with the FSC’s policy to have as many as banks as possible to cooperate with the program.
T Co., a maker of handphone cases, became the first company to take advantage of the program. Kamco bought a building from T Co. for 4 billion won in May and leased it back to the company to help solve its cash flow woes.
SBC also provided operational funds to T Co. so that the handphone case maker would be able to buy back its building from Kamco when its finances improve.
Kamco has set aside 100 billion won to be provided to SMEs in financial trouble, including SMEs in court management workout programs and any SMEs that need funds to keep its operations going.
Kamco President Hong Young-man said the success of the financial program hinges on how fast those SMEs can normalize their operations after getting help from the program while the financial institutions which provided funds to SMEs with financial problems should be able to recover their financial health as early as possible.
Kamco has also been running a Ship Fund to help shipping companies in financial troubles sell their ships to Kamco and lease them back. Kamco and financial institutions will loan money to SPCs, which in turn will buy ships from the shipping companies with liquidity problems and SPCs will lease the ships back to them. SPCs will pay the loans they got from Kamco with the lease money paid them by the shipping firms.
KAMCO was established through the expansion and reorganization of the former Korea Asset Management Corp. in December 1999, as part of efforts to address the distressed assets of financial institutions and support measures to stabilize the management of firms that were showing signs of insolvency.
The KAMCO was founded in April 1962 under the Korea Development Bank Act, in an effort to provide the Korea Development Bank with a legal basis for collecting overdue bank loans. Since that time, the scope of its business has been gradually expanded.
In August 1997, when the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation was enacted, KAMCO was expanded and reorganized in compliance with the new regulations.
KAMCO’s capital reached 860 billion won as of the end of 2010, financed by the government, the Korea Finance Corporation and financial institutions. Basic operational policies and major matters concerning fund management are determined by the Management Supervisory Committee, consisting of nine members including the CEO of KAMCO, interagency executives and staff members, and outside experts. The KAMCO executives are the CEO, the Executive Vice President, five executive directors and an auditor. The board of directors, made up of the CEO, the executive vice president and executive directors, resolves major matters concerning the operations of KAMCO.
KAMCO is assigned fund management tasks related to the underwriting and liquidation of distressed assets, support for the normalization of firms showing signs of insolvency, management of national property, and support for personal credit, as well as the execution of other related tasks.
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