Policy lender to anchor W2.1tr restructuring package while rolling out five-year strategic investment plan
Korea Development Bank (KDB) Chairman and CEO Park Sang-jin announced on Wednesday the bank’s commitment to the government’s 2.1 trillion won ($1.46 billion) support package aimed at restructuring the South Korean petrochemical industry. KDB will spearhead the overhaul of the Daesan complex as the lead policy lender.
At his first press conference since assuming office in August, Park stated that KDB would contribute over 40 percent of the 1 trillion won in new funding allocated for the Daesan complex restructuring, involving Lotte Chemical Corp. and HD Hyundai Chemical.
“This project signifies the first proactive reform within a crucial industry, achieved through collaboration between the government, industry stakeholders, and financial institutions,” Park emphasized. “As a policy lender, we are dedicated to supporting the enhancement and revitalization of core industries facing structural challenges.”
KDB commits W430b fresh funding
Earlier in the day, the Ministry of Trade, Industry and Resources officially unveiled the 2.1 trillion won package during a ministerial meeting focused on industrial competitiveness. This marks the initial approval under a sector-wide restructuring roadmap announced six months prior, designed to encourage voluntary consolidation within the oversupplied petrochemical sector.
The restructuring plan involves Lotte Chemical spinning off its Daesan naphtha cracking center in Seosan, South Chungcheong Province, and merging it with HD Hyundai Chemical, a joint venture between Lotte Chemical and HD Hyundai Oilbank. Both shareholders will invest 600 billion won each into the new entity, resulting in equal stakes.
Operations at Lotte’s naphtha cracking center will be suspended, and downstream facilities will be scaled back, reducing annual ethylene capacity by 1.1 million metric tons. The newly formed company intends to shift its focus towards higher-margin specialty products and environmentally friendly output using alternative feedstocks such as ethane and bionaphtha.
Authorities will provide up to 2 trillion won in financial support, including converting up to 1 trillion won in existing loans into perpetual bonds. Of the 1 trillion won in new funding, KDB will contribute approximately 430 billion won towards facility investment and research and development.
Approximately 7.9 trillion won in debt covered by the restructuring agreement will be granted repayment deferrals through 2028, while maintaining current lending terms.
Park confirmed that detailed financing terms will be finalized through a creditor council.
“Petrochemicals are a fundamental upstream industry. A collapse at the front-end will inevitably impact downstream sectors,” he explained, urging creditor banks to cooperate and ensure the industry’s self-restructuring efforts proceed smoothly.
The Daesan approval is anticipated to expedite similar restructuring discussions in Yeosu, South Jeolla Province, and Ulsan, where producers like Yeochun NCC, LG Chem, GS Caltex, and SK Geo Centric are exploring consolidation opportunities.
W250tr growth program, venture push
Beyond the petrochemical industry, Park outlined his broader policy agenda as the first internal candidate to lead the state-run lender in its history.
He pledged to accelerate approvals under the 150 trillion won National Growth Fund, aiming for 30 trillion won in project approvals this year and expanding support for regional projects. KDB will also launch a separate 250 trillion won “KDB Next Korea” program over five years, directing funds into strategic industries, regional finance, and restructuring of legacy sectors.
Park stated that the bank is in discussions with regulators to ease risk-weighted asset calculations for policy-driven investments, arguing that excessive capital charges could hinder productive finance. These discussions with supervisory authorities are ongoing, with a decision expected as early as March.
Park also indicated a broader shift towards expanding KDB’s investment function to channel more risk capital into emerging industries.
While acknowledging criticisms that policy lending still relies on collateral and financial statements, he noted that KDB has been transitioning towards a credit- and innovation-based screening framework for new industries since 2018. According to Park, KDB currently invests approximately 500 billion won annually in startups and venture firms and commits up to 8 trillion won each year to fund formations.
“Under this system, KDB has built a virtuous cycle in which early-stage equity investment supports growth, followed by debt financing once companies reach stable revenue and profitability,” Parks said, adding, “We will continue to strengthen our investment-led approach to create an environment where innovative companies can grow.”
HMM dilemma: Busan relocation before sale
Regarding HMM, Korea’s leading shipping line, Park stated that relocating its headquarters to Busan remains the immediate priority, following President Lee Jae Myung’s initiative to move the company out of Seoul. Any potential sale will only be considered after the relocation is complete and in coordination with Korea Ocean Business Corp., which holds approximately a 35 percent stake alongside KDB, as well as relevant ministries.
HMM is expected to decide on the relocation at a shareholders’ meeting next month.
Reflecting on over three decades at KDB, during which he witnessed cycles of crisis and recovery across Korea’s core industries, Park emphasized the lender’s institutional responsibility to be at the forefront of structural reform.
“KDB has grown alongside Korea’s industrial development, and there has rarely been a time without challenges,” he concluded. “As the nation’s leading policy lender, we will devote all our capabilities to strengthening corporate competitiveness and contributing to easing polarization and lifting Korea’s potential growth.”
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