Shinbo Issues Over 1.6 Trillion Won in Securitized Bonds in July and August

Record High Supply of 8.4 Trillion Won This Year Alone
Leading Efforts to Resolve Polarization in the Corporate Bond Market by Expanding Support for Non-Investment Grade Corporate Bonds

[Asia Economy Reporter Ki Ha-young] On the 17th, the Korea Credit Guarantee Fund (KODIT) announced that, unlike previous years, it will actively supply liquidity by issuing more than 1.6 trillion won worth of asset-backed securities (ABS) in July and August. This is based on the expectation that from the second half of the year, companies will face a significant decline in sales and profitability due to the impact of the novel coronavirus (COVID-19).

KODIT’s asset-backed company guarantees are a system that supports companies in raising long-term funds directly from the financial market by issuing asset-backed securities based on corporate bonds issued by individual companies.

KODIT is paying close attention to the deepening polarization in the corporate bond market since the spread of COVID-19. By the end of May, public offering corporate bonds were issued at a scale of 21 trillion won, similar to the same period last year. Among these, high-grade corporate bonds rated AA or higher increased by 3.2 trillion won (23.5% increase) compared to the previous year, while non-investment grade corporate bonds rated BBB or lower decreased by 800 billion won (61.0% decrease).

This indicates that while the demand for corporate bond issuance for fundraising remains steady, market demand for non-investment grade bonds has declined, intensifying liquidity shortages for mid-sized and large companies rated BBB or lower.

Accordingly, KODIT has significantly increased its new supply plan for asset-backed company guarantees to 8.4 trillion won this year, aiming to expand the issuance scale for companies facing difficulties in fundraising due to temporary credit rating downgrades caused by COVID-19, and is also working to improve interest rate conditions to reduce financial cost burdens.

As a result, since the support for asset-backed company guarantees began in March, many companies have applied, and a total of 1.2 trillion won has been sequentially supported by the end of May. In June alone, more than 1 trillion won of new funds are planned to be supplied.

In particular, this year, KODIT has established a plan to issue 1.6 trillion won worth of securities even in July and August, months when there were no previous asset-backed securities issuances, to ensure that no companies fall into a financial support blind spot. Applications for issuance in July will be accepted until the 24th of this month, and applications for August issuance will be accepted until July 24th.

A KODIT official said, “Asset-backed company guarantees are not only a policy finance system that stably supplies liquidity to companies but also have a proven track record of stabilizing the market whenever the corporate bond market shrinks, such as during the global financial crisis.” He added, “Based on our experience and expertise, KODIT will operate crisis response programs efficiently and do its best to overcome the crisis early.”

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