"If You Wait Until Cash Runs Out, It's Too Late... Restructuring Is a Management Tool, Not a Failure" [Corporate Renewal 2.0] ①

Interview with Jeongju Lim, Head of Restructuring Division at Alvarez & Marsal Korea
A 30-year veteran of Korea Development Bank and corporate restructuring
"Go beyond financial support to include business reorganization and operational improvem

Editor's NoteWarning signs always precede corporate distress. For years, signals such as declining revenue and profit and mounting debt continue to emerge, yet many companies, fearing the stigma associated with restructuring, ignore these warnings and endure solely through additional borrowing, only to eventually collapse. In contrast, companies that act proactively often manage to turn crisis into opportunity. The Asia Business Daily will, over three installments, diagnose the 'golden time' for corporate restructuring in Korea and explore how companies can establish a self-sustaining restructuring ecosystem before insolvency sets in, as well as the respective roles of the government, financial sector, and private capital.

① "They Borrow Until the Brink of Collapse": Companies Missing Their Window for Restructuring
①[Interview] "If You Wait Until Cash Runs Out, It's Too Late... Restructuring Is a Management Tool, Not a Failure"
② "Can Lending More Money Save a Company?... The Crux of Restructuring Is Corporate Competitiveness"
②[Interview] "The Most Important Thing Is Cause Analysis; Next Comes Selection and Focus"
③ Let the Government Set the Stage... A Proactive Restructuring Ecosystem Driven by Corporates and Financial Institutions

"By the time a crisis becomes reality, it's already too late. Companies need to act when they still have cash, corporate value, and multiple strategic options available."

Jeong-Joo Lim, Head of Restructuring at Alvarez & Marsal Korea, met recently with The Asia Business Daily and identified 'timing' as the single most critical factor in corporate restructuring. Rather than waiting until they hit the limits and are forced into a workout program or rehabilitation procedures, he emphasized the need for companies to act before their business competitiveness suffers irreversible damage.

Lim spent over 30 years at Korea Development Bank overseeing corporate finance and restructuring work. He served as Head of the Restructuring Division and Head of Corporate Restructuring Center, and gained direct experience in large-scale restructuring operations for conglomerates such as Daewoo Shipbuilding & Marine Engineering and HMM. This year, he joined Alvarez & Marsal Korea as Head of the Restructuring Division.

He commented that "Historically, restructuring in Korea has been 'reactive,' 'government or creditor-led,' and 'focused primarily on financial restructuring,'" adding, "Going forward, the process needs to become more proactive and market-driven. In addition to financial restructuring, it should also encompass business restructuring and operational improvement."

Jungju Lim, Head of Restructuring at A&M Korea. A&M

"Business Adjustment Needed Before Crisis Hits"... Injecting Capital Alone Cannot Restore Normal Operations

Lim explained that while it is difficult to define the 'golden time' for restructuring based on any single financial ratio or timing, companies must watch for repeated liquidity shortages, increases in borrowing, shortening maturities, as well as declining EBITDA and margins from core businesses, and a drop in market share—all signs that the company's fundamental business strength may be weakening.

He especially emphasized the significance of operating cash flow as an indicator. "No matter how much revenue and profit are recorded, if operating cash flow doesn't materialize, the company can collapse at any moment," he said, adding, "A persistent deterioration in operating cash flow is an early warning signal that should prompt companies to investigate fundamental structural issues and take preemptive action."

Even if a company reports profits from product sales, cash may not be collected if revenue remains as accounts receivable. Meanwhile, cash outflows such as payroll and raw material costs continue unabated. Referring to his time at Korea Development Bank, where he handled the Daewoo Shipbuilding & Marine Engineering account, Lim recalled, "On paper, profits appeared substantial, but upon review, operating cash flow had started to turn negative." He noted, "That was an early warning sign."

He also stressed the importance of so-called 'proactive restructuring,' whereby companies, as SK and POSCO did, reassess and divest non-core businesses and reallocate resources toward future core businesses before a crisis fully materializes. Lim described this as "a meaningful step," emphasizing "The key is to secure as many viable options as possible while significant corporate value remains."

Lim warned that restructuring should not be confined to simple liquidity support. "If financial restructuring merely gives companies time and liquidity, business and operational restructuring are what enable a company to generate cash flows in a sustainable manner," he said. "It's impossible to achieve a sustainable turnaround with just one or the other."

Even if maturities are extended and interest rates reduced, if the core business cannot generate cash flow, crises will only recur. In the end, withdrawal from loss-making businesses, disposal of non-core assets, cost and working capital improvements, and a portfolio realignment must all proceed in tandem.

During this process, Lim cautioned against making decisions on what to keep or divest based solely on sales volume or past significance. "You need to take a comprehensive look at profitability and cash flow by business, the relevance to core operations, the scale of required investment, and growth potential," he suggested. "The fundamental challenge is not how much additional capital can be raised but what changes will be made in the time secured by that capital," he added.

"A Restructuring Ecosystem Is Needed"... Early Intervention, Private Restructuring Capital, and More

As for the challenges facing Korea's corporate restructuring system, Lim pointed out that a proactive, market-based restructuring framework is not yet sufficiently established—one that permits intervention before issues become critical. Beyond the existing legal and creditor-financial institution-oriented infrastructure, he emphasized the need for a market that actively combines private capital and specialized restructuring expertise.

In particular, Lim argued that private capital—such as private equity funds (PE) and restructuring funds—should be allowed to participate in normalization when corporate value remains. "Private capital must not be limited to investors who buy distressed debt at a discount; they should be able to act as 'restructuring capital'—providing the necessary capital for normalization and engaging far more proactively in the process," he said.

Jeong-Joo Lim, Head of Restructuring Division at Alvarez & Marsal Korea. Alvarez & Marsal

To this end, he stated that sufficient information must be available regarding the financial and business status of companies under restructuring, and the predictability of decision-making among creditors and procedural steps must also be strengthened. He further highlighted the importance of protecting new capital, establishing clear paths for capital recovery after normalization, and having qualified professionals and institutions capable of resolving conflicts of interest and developing restructuring plans that are practical and actionable.

Lim stated, "It's not simply a matter of introducing a new system. There must be a deeply interconnected restructuring ecosystem involving early intervention, specialized restructuring expertise, stakeholder negotiations, and private restructuring capital."

He particularly underscored the importance of clear role-sharing among participants in the restructuring process. "Companies must recognize issues early and take needed action; financial institutions should go beyond passive maturity extensions to assess the potential for normalization and offer necessary financial solutions," he said.

He continued, "Courts should offer predictable and efficient legal processes, while the government must address systemic risks beyond the reach of the market and establish institutional frameworks to ensure the restructuring market functions smoothly. Private capital and specialized restructuring advisory firms should provide both capital and expertise to develop actionable recovery solutions," he explained.

Lim reiterated that "Restructuring should not be viewed simply as a result of workforce reduction or failure, but as a process of preserving enterprise value, safeguarding competitiveness, and transforming the company toward a sustainable business structure."

Separately, Alvarez & Marsal has grown as a global specialist advisory firm, grounded in expertise in restructuring and turnarounds. It provides a wide range of support for crisis management, including not only improving financial structures but also business restructuring, emergency liquidity procurement, capital structure reorganization, and distressed M&A. Alvarez & Marsal entered the Korean market in 2013, and in April of this year, officially launched its Korea restructuring division led by Jeong-Joo Lim and Vice President Daihee Jeong.

This content was produced with the assistance of AI translation services.