South Korea’s Corporate Bankruptcies Rise to Highest Since 2005

By William Sim

Jan. 19 (Bloomberg) -- South Korean corporate bankruptcies rose to their highest level in almost four years in December as the nation headed for its first recession since 1998.

The number of businesses whose checking account transactions with banks were newly suspended jumped to 345 last month, the most since March 2005, the Bank of Korea said in a statement today. Some 297 companies went out of business in November, according to the report.

South Korea’s economy probably contracted last quarter as domestic demand and exports faltered, Bank of Korea Governor Lee Seong Tae said this month. The government has allocated about 140 trillion won ($103 billion), or 15 percent of gross domestic product, in extra liquidity, tax cuts and stimulus spending to cushion the economy from the deepening global slump.

Ssangyong Motor Co., 51 percent owned by China’s SAIC Motor Corp., applied for bankruptcy protection on Jan. 9 in Seoul as plunging vehicle sales caused a “serious liquidity crisis.”

Other companies are cutting jobs and curtailing output to cope with falling demand.

Hynix Semiconductor, the world’s second-biggest maker of memory chips, said last month it would eliminate 30 percent of its executives. Hyundai Motor Co. and Kia Motors Corp. have reduced their employees’ working hours.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net