6 Securities Firms Voluntarily Agree to Expand Mezzanine Investments

[Asia Economy Reporter Oh Ju-yeon] Comprehensive financial investment companies engaged in Prime Brokerage Services (PBS) have decided to expand their mezzanine investment budgets to prevent concerns over the contraction of the private equity fund market. This move is interpreted as an effort to prevent difficulties in funding even for sound companies following the recent suspension of redemptions in Lime Asset Management's private equity funds.

On the 16th, the Korea Financial Investment Association announced that six securities companies?Mirae Asset Daewoo, NH Investment & Securities, Samsung Securities, KB Securities, Korea Investment & Securities, and Shinhan Investment Corp.?have each resolved to increase their investment budgets by 100 billion KRW, totaling approximately 600 billion KRW.

The secured budget will be used to invest in mezzanine assets such as convertible bonds (CB) and bonds with warrants (BW) of sound KOSDAQ companies that have undergone screening. By purchasing mezzanine assets at market prices and investing for the long term, they plan to contribute to the expansion of venture capital supply.

These six comprehensive securities firms with equity capital exceeding 4 trillion KRW, engaged in PBS business, agreed on the necessity to prepare for liquidity risks of mezzanine-issuing companies. This is because the suspension of redemptions in funds mainly invested in mezzanine by Lime Asset Management raises concerns about the contraction of funding even for sound companies.

The Korea Financial Investment Association explained, "This is a voluntary decision by securities firms to contribute to the government's policy to revitalize corporate financing investments, including for small and medium-sized enterprises." It added, "We expect that this responsible decision by securities firms regarding the capital market will contribute to the smooth funding of sound SMEs and enhance trust in the capital market. Furthermore, if institutional improvements such as easing prudential regulations for expanding venture capital supply and the prompt approval of issuance of commercial papers are accompanied, funding for innovative companies can be executed more quickly and smoothly through diverse and efficient financing methods."

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