Yoo Seong-min, "Kim Jin-tae's Mention of Corporate Workout Sends Fear Throughout the Financial Market. He Shouldn't Take Bankruptcy Lightly"

Former lawmaker Yoo Seong-min. Kyunghyang Shinmun Archives

Former lawmaker Yoo Seong-min said, “One comment by the Gangwon-do governor on requesting the court for a corporate workout of GJC (Gangwon Jungdo Development Corp.) has paralyzed the bond market and spread fear throughout the financial market,” and cited Gangwon-do Governor Kim Jin-tae as the cause of the current unrest in the financial market.

On October 23, Yoo expressed his views on his social media account along with Governor Kim’s name in the hashtag. Earlier on September 28, Gangwon-do announced that it would request a corporate workout for Gangwon Jungdo Development Corporation, which oversaw the groundwork around Legoland in Jungdo Island, Chuncheon. At the time, Governor Kim said, “We have decided to ask the court for a corporate workout of GJC to help free Gangwon-do of its repayment guarantee.” The public interpreted the governor’s words to mean that the local government could no longer guarantee the repayment of loans, and volatility increased in the financial market.

Yoo said, “The market economy exists and the financial market operates on the belief that a promise (contract) will be kept,” and stressed, “Unless the entire Gangwon-do goes bankrupt, the provincial government should keep its promise to repay 205 billion won of asset-backed commercial papers (ABCP) issued by GJC.” He also said, “From the start, there was no way for just Legoland to go insolvent leaving Gangwon-do unharmed,” and argued, “A workout request by a local government intended to just ‘sever the tail’ is impossible. Local governments should not think of insolvency so lightly.”

Yoo continued and said, “The central government should take this case as an opportunity to revise its principles on the financial regulations of local governments.” The former lawmaker argued, “We need to clearly stipulate the authority and responsibility concerning the local government’s issuance and repayment guarantee of bonds, local public enterprises’ reckless expansion of businesses, and the insolvency of a local government to prevent the entire financial market from panicking at one word by the governor.”

Members of the People Power Party also voiced their concerns. One first-time lawmaker said to the reporter over the phone, “If a local government makes such a statement, it doesn’t fit the national prestige of the Republic of Korea either,” and added, “If that is how they act despite receiving tremendous support from the central government, then there is a problem.”

The People Power Party, the government and the Office of the President held a private meeting of senior officials at the prime minister’s residence in Samcheong-dong, Seoul on October 23 and reportedly agreed to inspect how tight the money market is following the default of Legoland and keep a close eye on the market situation. The Ministry of the Interior and Safety announced that on October 23, it confirmed the loan repayment guarantee status of thirteen local governments nationwide along with their intention to fulfill the guarantees. According to the Interior Ministry, two upper-level local governments including Gangwon-do and eleven lower-level local governments expressed their intention to faithfully fulfill their promise of repayment.