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South Korea to Set Up $16 Billion Restructuring Fund

South Korea plans to launch a $16.2 billion fund as early as this month to buy bad loans from financial institutions and assets from cash-strapped companies for 2009, a financial regulator said on Monday.

The 20.24 trillion won ($16.17 billion) fund will include 20.12 trillion won in bonds issued by state debt clearer Korea Asset Management Corp (KAMCO).

"Corporate restructuring is expected to gather pace as the restructuring fund will be able to quickly acquire and liquidate assets of restructuring companies," the Financial Services Commission said in a statement.

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The country will take measures to minimize the impact of the new debts on the local bond market, such as paying KAMCO bonds for bad loans.

It will spend 4.7 trillion won to buy property project bad loans at local banks and 1 trillion won to buy vessels from cash-strapped shipping companies.

The plan, subject to parliamentary approval, is part of a planned 40 trillion won fund announced earlier this year to support corporate restructuring until 2010. The government will submit the bill later this month.