SPV for Low-Credit Corporate Bond Purchases Extended for 6 Months... Non-Investment Grade Bond Ratio Expanded to 75%

[Sejong=Asia Economy Reporter Kim Hyunjung] The government will extend the purchase period of low-credit corporate bonds by the Special Purpose Vehicle (SPV) for corporate liquidity support by six months to facilitate smooth financing for low-credit companies. Additionally, to strengthen support, the proportion of non-investment grade bond purchases will be expanded to 75%.

The government, the Bank of Korea, and the Korea Development Bank announced on the 23rd, following the 4th Emergency Economic Central Countermeasures Headquarters meeting, that the purchase period for corporate bonds and commercial papers (CP) by the SPV, which officially launched in July, will be extended by six months. Accordingly, the purchase deadline, originally January 13 next year, will be postponed to July 13.

To strengthen support for low-credit grade corporate bonds and CPs, the SPV's purchase ratio of investment-grade bonds (AA) will be lowered from the existing 30% to 25%, and the proportion of non-investment grade bonds (A~BBB) will be expanded from 70% to 75%. A Ministry of Economy and Finance official explained, "This is intended to better adhere to the purpose of the SPV's launch and operation." He added, "If purchases are skewed toward investment-grade bonds, the effectiveness of SPV operations decreases, and if non-investment grade bond purchases are excessive, losses could increase. Based on previous operational results, it was judged that expanding non-investment grade bond purchases is acceptable."

To secure the SPV's purchasing capacity, which was established with a total scale of 10 trillion won, a second capital call of 2 trillion won will be executed. A capital call refers to the method of raising part of the investment funds, executing the investment amount, and then executing additional funds if there is further demand. As of the 24th, out of the first raised amount of 3 trillion won, 2.5 trillion won (82.4%) has been exhausted.

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