More publicly traded companies are providing large debt guarantees for their subsidiaries' new businesses and real estate project financing. Notably, Naver and Daewoo Engineering have reported guarantees exceeding 10 trillion won.
According to the Financial Supervisory Service's electronic disclosure system, 109 announcements related to 'decisions on guarantees for others' were recorded from September 28 to October 28. This figure includes overlapping disclosures from holding companies and subsidiaries, as well as corrections to existing guarantees, meaning the actual number of new guarantees may differ.
Several companies have reported guarantees in the trillions of won. On October 27, Naver announced a guarantee of 18.74 trillion won related to its subsidiary Naver Cloud's AI factory project. This represents 64.73% of its equity, bringing the total outstanding amount, including this guarantee, to approximately 19.49 trillion won. However, this amount is based on the assumption that the entire investment limit of $9 billion for AI infrastructure will be fully utilized, with the nominal total expected to occur by the end of 2034.
A Naver representative stated, "This guarantee reflects potential payment obligations arising from long-term supply contracts related to the AI infrastructure business. At the time of disclosure, there were no confirmed payment obligations, and the actual burden may vary depending on future business developments."
In the construction sector, the burden of conditional debt assumption related to project financing has become prominent. On October 28, Daewoo Engineering guaranteed 142.5 billion won for a liquidity loan related to the construction of an officetel in Jinju Innovation City. This is 4.10% of its equity, but the total outstanding debt guarantees amount to approximately 11.47 trillion won, exceeding three times its equity. Daewoo's guarantees are structured such that if it fails to fulfill its funding obligations, it assumes the debt. The total outstanding amount includes unused guarantee limits, so it differs from confirmed liabilities.
HL D&I guaranteed 275 billion won for an office development project in Seongsu-dong on October 6. This is 48.05% of its equity, with conditions attached for debt assumption in case of failure to complete the project. IPARK Hyundai Industrial Development also decided on a guarantee of 456 billion won, with a total outstanding amount of approximately 2.8 trillion won. In contrast, Taeyoung Construction reflected changes in guarantee periods and reductions in amounts due to partial repayments in its corrections on October 22 and 23. The repeated corrections do not necessarily indicate an increase in guarantee burdens.
In the manufacturing sector, overseas investments and financial support for subsidiaries have been confirmed. Sangshin EDP guaranteed approximately 34.1 billion won for the expansion of its factory in the United States, which is 21.28% of its equity. Dongwha Enterprise guaranteed 150 billion won during the financing process of a special purpose company related to its subsidiary, representing 17.04% of its equity.
A securities industry official noted, "Debt guarantees are a means of supporting subsidiaries' financing, but if the debtor fails to fulfill its obligations, it can create financial burdens for the guaranteeing company. Since the conditions for obligations vary by guarantee type, it is essential to consider both the actual debt burden and the conditions for executing the guarantee, rather than just the guarantee amount."
* This article has been translated by AI.
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