Chaean Fund Purchases 20 Billion KRW from Meritz Capital... First Acquisition of Corporate Bonds

[Asia Economy Reporter Minji Lee] The Bond Market Stabilization Fund (BMSF), established by the government to alleviate corporate liquidity crunches, has purchased specialized finance company bonds (SFC bonds) for the first time.

According to industry sources on the 14th, the BMSF purchased 20 billion KRW worth of 3-year maturity, bearer, coupon-bearing, unsecured bonds (capital bonds) issued by Meritz Capital on the same day.

The issuance interest rate was set at an annual 1.809%, which is 0.06 percentage points higher than the private evaluation company’s announced rate (Minpyeong) for SFC bonds of the same rating.

Meritz Capital’s credit rating is 'A+', which is lower than the BMSF’s purchase condition (AA- rating or higher), but this SFC bond received an 'AA' rating thanks to the payment guarantee from its major shareholder, Meritz Financial Group.

Following its first purchase of commercial paper (CP) on the 3rd, the BMSF decided to invest 30 billion KRW in a 3-year corporate bond issued by Lotte Food on the 6th, and placed a purchase order during the demand forecast for Lotte Chilsung Beverage’s corporate bonds on the 13th.

Until now, the BMSF’s investment decisions on SFC bonds have lagged behind those for CP or corporate bonds, raising concerns about liquidity crunches for card companies and capital companies. In response, the Financial Services Commission has stated the principle that "the operation of the BMSF primarily aims to supplement market supply and demand, and it is desirable for financial companies to prioritize market fundraising efforts."

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