Financial Authorities to Auction Off Insolvent Real Estate PF Projects Worth 13.5 Trillion Won

Starting this month, the financial authorities are set to put up for auction and public auction real estate PF (project financing) projects worth 13.5 trillion won that have been assessed as being insolvent.

According to financial authorities, the results of the first business feasibility assessment of real estate PF business sites with concerns of insolvency showed that 1 out of 10 real estate PF business sites are subject to restructuring.

As of the end of June, the total PF risk exposure of the financial sector amounted to KRW 216.5 trillion. The Financial Supervisory Service evaluated the business viability of businesses (KRW 33.7 trillion) that had been delinquent, deferred, or extended three or more times.

The evaluation results show that the risk exposure of businesses that received a ‘Cautionary/Insolvent Concern’ rating amounted to KRW 21 trillion, or 9.7% of the total. The number of businesses subject to auctions and public auctions with concerns of insolvency amounted to KRW 13.5 trillion.

Based on the results of the first business feasibility assessment, financial authorities will promote restructuring of businesses at risk of insolvency.

Park Sang-won, Deputy Governor of the Financial Supervisory Service, said that active auction and public auction volumes are expected to emerge starting in mid-September. He explained that since public auctions and restructuring will be conducted sequentially as maturities approach, there will not be a concentration of sales at a specific time.

The key is the market’s interest in PF businesses that have been assessed as being insolvent. If they are sold at 50-60% of their original price through public auctions, their profitability will increase, and they are likely to find new owners.

However, there is also analysis that properties with low competitiveness in terms of location or purpose may not be readily absorbed by the market.