Saedoyak Fund buys W2.61tr in overdue debt from Sangnoksu, KB Star and others

The Saedoyak Fund, the government's long-term debt restructuring body for overdue loans, said Friday it had purchased approximately 2.61 trillion won ($1.8 billion) in long-term overdue bonds held by securitization companies including Sangnoksu and KB Star, public institutions including the Korea Federation of Credit Guarantee Foundations, mutual finance lenders including Nonghyup and credit unions, and loan companies.

The purchase will free approximately 236,000 debtors from debt collection.

The sixth round of purchases included a large volume of long-term overdue bonds from securitization companies that President Lee Jae Myung had publicly flagged. Sangnoksu transferred bonds worth 723.5 billion won held by 87,000 debtors to the fund, while KB Star transferred bonds worth 281.7 billion won held by 18,000 debtors. Both companies plan to sell their remaining bonds — those outside the fund's eligibility criteria of unsecured personal or sole-proprietor debt overdue for at least seven years and under 50 million won — to the Korea Asset Management Corp. in the second half of the year.

By sector, the sixth-round breakdown was: public institutions at 1.44 trillion won covering 110,000 debtors, loan companies at 104 billion won covering 14,000 debtors, Nonghyup at 27.3 billion won covering 3,000 debtors, and credit unions at 6.8 billion won covering 1,000 debtors.

Across all six rounds of purchases to date, the Saedoyak Fund has acquired bonds totaling approximately 11.7 trillion won. The number of beneficiaries stands at approximately 957,000, including overlapping cases.

Among the purchased bonds, debts owed by socially vulnerable groups — including recipients of basic livelihood benefits — will be written off without a separate repayment capacity review. For all other bonds, a repayment capacity assessment will be conducted: those found to have lost repayment capacity at a level comparable to personal bankruptcy will have their debts written off within one year, while those with significantly insufficient repayment capacity will undergo debt restructuring.

The repayment capacity review is set to begin after Aug. 13, when an amendment to the Credit Information Act takes effect allowing the fund to collect information on financial assets and other data.

Creditor financial institutions began notifying debtors last week of the planned bond transfers. Debtors can check the results of their repayment capacity review and whether their bonds will be written off through the Saedoyak Fund's website.

Starting in August, the fund plans to purchase additional long-term overdue bonds held by financial institutions across all sectors and public institutions.

Of the top 30 loan companies by long-term overdue bond holdings, 15 have joined the Saedoyak Fund agreement. Bonds purchased from the loan sector total approximately 739.4 billion won.

The Saedoyak Fund said it would "actively review substantive incentive measures to expand loan companies' participation in the fund and continue to communicate with the industry."