Suhyup to sell $432 mn worth of NPLs

[Courtesy of Suhyup]

South Korea’s National Federation of Fisheries Cooperatives (Suhyup) plans to sell 600 billion won ($431.57 million) worth of non-performing loans (NPLs) via asset securitization. The move is an effort to manage the soundness of individual fisheries cooperatives, whose delinquency rate hit the 5 percent range as of the end of May 2024, which is considered high.

Sources from the financial sector said on Thursday that Suhyup plans to sell 600 billion won worth of NPLs through a competitive bidding process with a sale manager in the third quarter of 2024. It conducted a demand survey targeting 90 cooperatives operating mutual finance nationwide at the beginning of the year, where more than half, or 47 cooperatives, submitting NPLs for sale. Suhyup will convey the pricing information to the individual cooperatives in early July and will finalize the NPLs for sale around the middle of the same month.

“In addition to selling NPLs, we are making efforts to reduce delinquent loans through various methods such as public auctions, write-offs, and debt adjustments,” a Suhyup official said.

This NPL sale is expected to be more efficient as it is conducted collectively under Suhyup’s initiative, unlike previous years when individual cooperatives managed NPL sales independently. The intent to reduce NPLs among individual cooperatives is also reflected in the plan to sell three times more NPLs than usual in 2024.

The industry estimates that the delinquency rate of individual cooperatives was at the 5 percent range at the end of May 2024, up more than 1.5 percentage points from 4.14 percent at the end of 2023. If the sale of 600 billion won worth of NPLs is successful, the delinquency rate of individual cooperatives is expected to drop by up to 2 percentage points.

But price negotiations are seen as a key factor in the sale process, given the challenging conditions for non-bank financial institutions such as mutual finance and savings banks as they face an influx of NPLs.

“This asset securitization sale led by Suhyup is a good example of managing the soundness of financial institutions,” a financial authority official said. “If the funds from the syndicated loan facility are used, it could be even more helpful in managing delinquency rates.”