Banks Extend Due Dates on S. Korean Loans
A coalition of major international banks Thursday agreed to keep extending the due dates of South Korean loans until negotiators can finish devising a longer-term fix for the nation’s financial crisis.
The meeting, held at Citicorp’s Manhattan headquarters, involved 18 commercial and investment banks, South Korean government officials and representatives of the International Monetary Fund, which has fashioned a $60-billion public-sector bailout for the cash-strapped nation.
Thursday’s accord broadens an understanding that the bankers reached among themselves last week, racing against a Jan. 1 deadline when about $15 billion of short-term loans to South Korean banks came due.
The South Korean stock market has been reacting by bucking a broad slump in Asian markets. Seoul’s main stock index rallied again Thursday to close up 3.6%. It was the sixth upward move in the last seven market sessions.
But in early trading today, the main Korean stock index dropped 2% to 415.38, as a worsening financial crisis in Indonesia reverberated northward.
To avoid a wave of Korean defaults, the bankers agreed to “roll over,” or extend, those loans, as well as a far larger amount of short-term loans coming due over the next 90 days, according to a banker familiar with the discussions.
Meanwhile, they will continue work on a more comprehensive plan that would “simultaneously provide both incremental funds to increase reserves and a debt exchange to extend Korea’s maturity structure,” according to a statement released by Citicorp.
Among the options being discussed are an exchange of the short-term debt for longer-term loans backed by the South Korean government. Also proposed is a massive bond issue that might also be government-guaranteed, according to bankers familiar with the talks.
Korean officials will now fly to Seoul to acquaint other government officials with the terms of the proposals. Then they will return to New York for “substantive discussions” with the bankers during the week of Jan. 19, according to the statement.
Also Thursday, the IMF approved an accelerated $2-billion payment for South Korea, bringing its total emergency funding for Seoul to $13 billion in just more than a month.
A spokeswoman said the loan had been approved after a regular meeting of the IMF board. It is the fourth payment to be made on the IMF’s record-breaking $21-billion loan (its share of the $60-billion total package).
In Frankfurt on Thursday, the governor of the Bank of Korea vowed that the nation will repay all of its $100-billion-plus debt.
“I have never even considered the possibility that any creditor will have to write off anything,” Lee Kyung Shik said in an interview with Bloomberg News. “It’s just a matter of how we are going to repay the money.”
