Shinbo to Support SME Financing... Expansion of 'P-CBO' Guarantee Limit

COVID-19 P-CBO Guarantee System Improvement Table
[Photo by Credit Guarantee Fund]

[Asia Economy Reporter Song Seung-seop] The Korea Credit Guarantee Fund (KODIT) is temporarily expanding the guarantee limit for securitization companies (P-CBO) to support small and medium-sized enterprises (SMEs).

According to KODIT on the 6th, from this month until the end of the year, the "Expansion Plan for Securitization Company Guarantee Support" will be implemented for SMEs whose sales have decreased due to COVID-19.

P-CBO guarantees are a guarantee system supported by KODIT. It helps small and medium-sized and mid-sized enterprises raise funds directly in the financial market by issuing corporate bonds.

Currently, the guarantee support system calculates the support limit based on estimated sales derived from past performance. However, as estimated sales of companies have decreased and support limits have been reduced due to COVID-19, measures to respond have been taken.

For SMEs whose sales decreased by more than 50% compared to the previous year due to COVID-19 damage, the three-year average sales will be used as the basis. Since sales are considered over three years, the impact of the deteriorated performance last year is reduced. Accordingly, the support limit will also increase.

Companies at risk of credit rating downgrade due to COVID-19 damage will also be assisted. If KODIT’s Future Growth Rating is below grade 7 and the company handles New Deal or new growth engine items, operates in key industries, or is an export company, the support limit will be raised by one level. Thus, companies previously eligible for up to 1/4 of sales as the limit will be increased to 1/3, and those eligible for up to 1/6 will be increased to 1/4.

A plan to reduce financial costs has also been prepared. P-CBO guarantees require affiliated companies to compulsorily purchase subordinated securitization bonds. KODIT has significantly lowered the minimum purchase ratio of these bonds from 1.5% to 0.3%, greatly alleviating the burden on companies affected by COVID-19.

A KODIT official stated, “SMEs are facing difficulties in using financial services due to decreased sales and credit rating downgrades,” and emphasized, “We will boldly support companies by focusing on growth potential rather than past performance to prevent weakening of corporate competitiveness.”

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