40 Trillion Won Kian Fund Dormant for a Month

Application This Month Delayed to Next Month
No Other Eligible Applicants Besides Korean Air Seen

[Asia Economy Reporter Kangwook Cho] The 40 trillion won-scale Industrial Stabilization Fund (ISF), created to support companies facing liquidity crises due to the COVID-19 pandemic, has been at a standstill one month after its launch. The application announcement, originally scheduled for mid-this month, has been postponed to next month. Due to stringent requirements, even the outline of potential support candidates has yet to emerge.

According to the financial sector on the 26th, the ISF Fund Management Committee held its 5th meeting yesterday to discuss detailed plans for a specialized program supporting industrial sector partner companies. This was a follow-up measure after the government announced on the 19th that it would provide a total of 5 trillion won in operating fund loans starting in July to industrial sector partner companies. During the meeting, detailed discussions were held on a securitization (P-CLO issuance) method, including the purchase of partner company loan receivables from commercial banks by an SPV (Special Purpose Vehicle) established with a 1 trillion won investment from the ISF.

An ISF official explained, "Since the government newly announced support for industrial sector partner companies through the ISF, discussions were necessary at the management committee," adding, "Detailed discussions were conducted on the method of support through issuing securitized bonds (P-CLO) and on exceptions."

Since the ISF application schedule was not addressed as an agenda item, the support application was ultimately postponed to next month. Earlier, the government announced the ISF operation plan on May 20th, stating that applications from companies would be accepted early this month and disbursements completed. Financial authorities had planned to initiate the first bond issuance for fund formation early this month. The ISF management committee, launched on the 28th of last month, shared the same stance. Recognizing that many companies are struggling and desperate for support, the policy was set as "unconditional support within this month."

However, with even the president urging legislative amendments, and the ISF being created in less than a week from bill proposal to amendment, the fund has stalled, raising concerns that the golden time for corporate support may be missed.

Some argue that the delay in ISF support is because even if applications were accepted, the number of candidates might be small. It is analyzed that the urgency to activate the fund immediately is low since there are not many companies meeting the fund's support conditions.

In fact, aside from Korean Air, the outline of support candidates is unclear. Asiana Airlines is currently undergoing a merger and acquisition (M&A) process, and low-cost carriers (LCCs) are being supported through other programs rather than the fund. No clear candidate companies are visible in the shipping industry either.

A financial sector official said, "Currently, support for small and medium-sized enterprises with weak financial power is more urgent," adding, "Because the government's support threshold is high, even if the fund application announcement is made, companies are unlikely to line up to receive support."

[Image source=Yonhap News]

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