Debt to Equity ratio loosened for shipping industry

The regulation regarding debt to equity ratios reaching within 200 percent for forward shipping companies has been eased.

The government and ruling party decided to flexibly apply the debt to equity ratio criteria, a measure to select companies for restructuring, for heavy debt dependent industries such as shipping companies, general trading companies, construction and aviation companies. Recently, the Maritime Affairs and Fisheries minister, Mr. Cheong, confirmed this decision through phone talks with the Financial Supervisory Commissioner.

An official at the Ministry of Finance and Economy said, "The four industries, such as general trading companies, shipping, constructing and aviation, have usually shown high debts even in foreign countries. We agreed to relax the 200 percent debt to equity ratio, which has been equally applied to 64 business categories."

The government and ruling party also decided to consider the interest amounts for these four industries when they judge whether a company needs restructuring or not. They will exclude companies from restructuring when creditor banks acknowledge their ability to repay debts, and its interest coverage ratio is over one. An interest coverage ratio is sales profit divided by interest payments. If the number goes over one, it means this company can afford to pay the interest through sales activity.