3rd Corporate Restructuring Fund Raised 1 Trillion Won... "Preparing for Increased Restructuring Demand"

Following the 1st and 2nd Funds (3.2 trillion KRW), an additional 3rd Fund worth 1 trillion KRW to be raised this year

[Asia Economy Reporter Park Sun-mi] The Corporate Restructuring Innovation Fund, which will lead market-driven restructuring, will be additionally raised to the scale of 1 trillion won this year.

On the 10th, the Financial Services Commission announced that following the previous Corporate Restructuring Innovation Funds (1st and 2nd rounds) totaling about 3.2 trillion won, the 3rd Corporate Restructuring Innovation Fund will be raised to the scale of 1 trillion won this year in preparation for the increased demand for restructuring due to COVID-19.

The Corporate Restructuring Innovation Fund, which has been raised to about 3.2 trillion won so far, has invested approximately 1.76 trillion won in 38 companies, including planned investments confirmed for execution between May and June. The first fund, worth about 1.64 trillion won, mainly invested in mid-sized and small enterprises in the shipbuilding, construction heavy equipment, and steel sectors, contributing to strengthening the competitiveness of key industries. Additionally, the second fund, worth about 1.53 trillion won, diversified investment methods by participating in acquisitions of subsidiaries of large corporations beyond mid-sized and small enterprises.

This 3rd Corporate Restructuring Innovation Fund will raise a mother fund of 451 billion won based on 67.5 billion won of government finances, with contributions from policy financial institutions (Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea, Korea Asset Management Corporation) as well as banks and securities firms (Shinhan Bank, Kiwoom Securities). Furthermore, it plans to attract more than 550 billion won in private investment, bringing the total scale to over 1 trillion won.

First, a separate allocation of capital (750 billion won of the mother fund) will be assigned to capable new and small asset management companies to encourage market entry. Also, while the current private capital matching ratio is over 50% of the fund formation amount, it will be operated flexibly (40-60%) depending on the nature of the fund. Moreover, whereas the 2nd fund limited debt investment-only funds (PDF) to post-restructuring companies (DIP financing exclusive funds), the 3rd fund plans to expand investment targets to include preemptive restructuring companies (such as those with capital erosion or excessive debt) to activate proactive restructuring.

To ensure continuous investment in post-restructuring companies (workout, rehabilitation procedure companies, etc.), incentives will be strengthened by increasing the performance fee from the existing 10% to 15%.

A Financial Services Commission official explained, "The Corporate Restructuring Innovation Fund has served as a catalyst in the restructuring market by expanding restructuring participants, inducing private capital inflow, and contributing to diversification of investment methods." He added, "Regarding the 3rd fund, we plan to promptly proceed with a call for asset management companies in May and start investments from June. By December, it is expected that the blind fund formation will be completed and investments will commence."