'Scale-up Finance' Issued by 93 Companies Amounting to 350.6 Billion KRW

Promising Small and Venture Companies Selected to Lead Innovative Growth in the Post-Corona Era

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#. Automotive parts manufacturer Company A was in the process of actively entering the electric vehicle market when the business environment significantly deteriorated due to a decrease in production by completed vehicle manufacturers and a contraction in global demand caused by the novel coronavirus disease (COVID-19). It was a time when large-scale investment funds were needed to expand production of new electric vehicle parts alongside the growth of the global electric vehicle market. Generally, small and medium-sized enterprises (SMEs) find it difficult to issue corporate bonds on their own credit, but with the help of Scale-up Finance, they were able to issue bonds and secure the necessary funds of 4.1 billion KRW.

#. Aircraft parts manufacturer Company B, despite the difficult aviation industry environment hit hard by COVID-19, newly secured orders for parts supply for passenger-to-cargo aircraft conversion projects from overseas. However, due to worsening business conditions and corporate performance, the company faced difficulties in raising operating funds to promote new projects. With support from Scale-up Finance, they were able to raise 2.9 billion KRW through corporate bond issuance, enabling self-funding and maintaining employment for current staff.

The Ministry of SMEs and Startups (Minister Park Young-sun, hereinafter referred to as the Ministry) announced on the 27th that through the 2020 Scale-up Finance program worth 350.6 billion KRW, asset-backed securities (P-CBO) were issued to support 93 SMEs in raising funds via corporate bonds. Scale-up Finance is a program that supports SMEs, which find it difficult to issue corporate bonds on their own credit, to raise funds through the direct finance market.

SMEs can structure the corporate bonds issued through Scale-up Finance into asset-backed securities and sell them to private investors and the Small and Medium Business Corporation, thereby raising the necessary funds. This year, due to the high demand for funds from SMEs experiencing temporary liquidity difficulties caused by COVID-19, the issuance schedule was changed from twice a year to once a year for faster support, and the issuance size per round was increased significantly.

Through the 2020 Scale-up Finance issuance, large-scale funding through the direct finance market was supported for promising SMEs in non-face-to-face new industries leading the post-COVID era, traditional manufacturing sectors such as key industries, and private investment underserved areas. These companies are expected to help create sustainable new jobs while maintaining the stability of existing jobs.

Looking at the status of SMEs issuing corporate bonds through this Scale-up Finance, 84% of them are rated B+ by credit rating agencies. By industry, core industries such as key industries and general manufacturing account for 68%, while new industry sectors including non-face-to-face, D·N·A (Data, Network, Artificial Intelligence), and Big 3 (system semiconductors, bio-health, future cars) make up 22%.

Corporate bond issuance interest rates vary according to credit rating and type of issued securities, with maturities of 3 years. The issuance size per company ranges from a minimum of 1.5 billion KRW to a maximum of 6.8 billion KRW depending on the credit rating. SMEs supported by this Scale-up Finance can build trust in the corporate bond market and develop the ability to issue corporate bonds independently in the future, and among the supported companies that have already attracted external investment, additional funds raised through corporate bonds can complement equity investments with debt-type funds, helping secure continuous growth capital and balanced financing.

No Yong-seok, Director of Global Growth Policy at the Ministry, stated, "Scale-up Finance will play an effective role in supporting direct financial fund-raising for promising SMEs that find it difficult to issue corporate bonds due to COVID-19," adding, "We will continue to diversify necessary financial support so that SMEs can actively respond to the post-COVID era."

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