Korea Asset Management Co. (KAMCO) faced one of the toughest problems in 1997 on the path of its growth because it had to take care of a string of corporate bankruptcies in the wake of the Asian foreign exchange crisis, officials of the company recalled.

In January of that year, the Hanbo Group went belly up followed by a series of defaults by a number of large businesses, which led to bank losses from loan defaults and corporate bankruptcies, making financing and foreign exchange too much for the private sector to handle.

The government had to step in and set up the fund at KAMCO to take care of the financial fiasco and began to buy bad assets from banks beginning on Nov. 26, 1997, starting with 4.4 trillion won in total from Seoul Bank and Cheil Bank.

KAMCO had taken over bad assets totaling 111.5 trillion won by November 2002 with 39.2 trillion won in funds °™ 21.6 trillion won of that collected from various financial institutions and 17.6 trillion won in from funds invested in bad assets and the issuance of bonds.

The asset management company took care of 79.2 trillion won of the 111.5 trillion won of bad assets that it took over from banks and recovered 46.2 trillion won of the funds used to take over the bad assets °™ 7 trillion won more than the actual funds that it spent, or 118 percent of the invested funds °™ a feat that no other government-run public financial institution ever achieved including even the Korea Deposit Insurance Corp.

KAMCO took bold measures that had yet to be used in Korea, including holding international biddings for bad assets and the issuance of asset-backed securities (ABS), all advanced financial dealings. It also hosted a number of international events such as road shows in five countries in Asia in 2000 and four U.S. cities including New York and Dallas to drum up investments in bad assets in Korea. The company also hosted an international forum on bad assets to attract foreign investments as part of its marketing efforts, all of which were considered to be daring moves to sell bad assets.

The fact that the company was able to recover its funds so successfully was owed to its daring measures including the breakup of the Daewoo Group by its affiliates, turning loans into investments, and other moves designed to restructure the companies in default in order to normalize their operations, which boosted their values allowing KAMCO to sell the loans that had become stakes.

KAMCO’s success in handling bad assets was illuminated during an international forum on the results of the clearance of defaulted assets during the last decade and its future tasks hosted by KAMCO with the support of the Ministry of Strategy and Finance and the Financial Supervisory Commission and the introduction of KAMCO’s success to member countries at the 2009 G-20 Summit in London as a model example of overcoming financial crises.

As such, the company has played the role of a locomotive in overcoming economic crises to the surprise of many, dashing concerns that the company would be a waste of funds when it was set up.

Thanks to the success the company has recorded, it was able to repay the entire 33.3 trillion won of funds created to take care of bad assets in July 2008 and paid the remaining 8.4 trillion won balance of the funds used to take care of bad assets to the government, easing its treasury burden.

The company’s official fund recovery effort continues. In June, the company successfully sold its 9.9 percent stake of Kyobo Life Insurance at a per-share price of 230,000 won for a total of 468 billion won.