The Korea Deposit Insurance Corporation (KDIC), Korea Asset Management Corporation (KAMCO) and the United Asset Management Company (UAMCO) jointly organized a public-private workshop at the Bankers’ Club in the Korea Federation of Banks building on Aug. 20, 2015.
The workshop was intended to facilitate the sharing of know-how and best practices in recovery. It is expected to contribute to enhancing each organization’s capacity to efficiently liquidate assets and thereby stimulate the economy. It is also expected to provide a forum for discussion and cooperation between the private and public sectors regarding the recovery of PF loan.
At the workshop, staff members in charge of recovering PF loans at the KDIC, KAMCO and UAMCO gave presentations with best practice examples. They also led discussions. The KDIC presented a case where it collected about 5 billion won from a loan used to finance a PF project that was unsecured and thus practically recoverable.
The KDIC found out that the borrower was trying to sell its interest in the project and obtained a court order for attachment and collection to receive dividends from the proceeds of the transaction.
Also, the KDIC signed an agreement with KAMCO and UAMCO for cooperation in asset sales during the workshop. The agreement calls for public and private sector organizations to cooperate to jointly market assets up for sale in accordance with the Government 3.0 Policy, to share information with regard to assets they share claims on, and to exchange best recovery cases. After the agreement, the KDIC plans to provide sale information and other relevant news from KAMCO and UAMCO on its PR channels, including the KDIC website and blog, in an effort to help prospective buyers find the assets that meet their needs
Savings Bank A extended 8 billion won worth of credit to Company B and Company C, respectively, in relation to a project to develop Industrial Complex D. However, the project hit a few bumps and an acceleration clause was invoked before the loans were fully repaid. Later, the KDIC saw an announcement in the government gazette by Free Economic Zone E that the developer for the project would be replaced. From that news and interviews with persons related to the project, the KDIC found out that Company B was in negotiations with Company F to sell its interest in the project. After an investigation of fund flows, it was confirmed that Company F had paid an advance on the transaction.
In response, the KDIC gathered experts including outside attorneys and KDIC staff members to develop recovery strategies. In preparation for when Company F would make a final payment to Company B, the KDIC asked the court to issue an order for attachment and collection of claims against Company F as a third-party debtor and obtained an order for attachment and collection of nearly 13.3 billion won for the outstanding balance and late payment fees based on a prior order of payment.
The borrower, Company B, alleged Company F’s breach of confidentiality and asked that the order of attachment be removed in exchange for repayment of part of the loan. Otherwise, Company B said that it would file a lawsuit to declare the contract with Company F null and void and claim a refund of costs.
The KDIC, which has a fiduciary duty as bankruptcy trustee of the now-failed Savings Bank A, decided that if the order was dropped without giving other creditors the chance to share in the proceeds, it would constitute a breach of trust. To ensure the fairness and transparency of its recovery activities, the KDIC deemed it to be appropriate to let the court to distribute the proceeds on a pro rata basis through court procedures. So it asked Company F to deposit the remaining amount with the court.
Company F deposited a total of 5.8 billion won with the court, and after it was decided how to allocate dividends to the KDIC and other general creditors of Company B, the KDIC received about 5 billion won in dividends.
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The KDIC building in Seoul.(Photos:KDIC)
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