Securities Firms Actively Participate in Real Estate PF Restructuring and New Investments

The Korea Financial Investment Association announced on the 29th that the securities industry plans to establish individual funds totaling approximately KRW 3.3 trillion from this year through next year to support the smooth landing of real estate project financing (PF) by participating in the restructuring and new investment of real estate projects.

The funds (PEFs) established by securities firms are structured so that individual securities firms lead (GP) and independently establish and operate them. These funds are raised through the participation of the securities firms' own capital and multiple LPs such as institutional investors, with the securities firms' own capital contribution amounting to about KRW 600 billion.

The fund capital will be used for purchasing loan receivables from PF projects, providing PF loans for new projects, and investing in NPLs. The plan is to support the restructuring and new investment of PF projects. Through this, projects lacking feasibility will undergo restructuring and liquidation, while projects with sufficient feasibility will receive liquidity support, thereby participating in the government's real estate smooth landing measures.

In May, regulatory easing was implemented through the government’s non-action letter, including risk weight reduction for residential real estate loans newly supplied by comprehensive financial investment business operators and special exemptions from financial company loss liability related to restructuring. The government policy is expected to provide institutional support for securities firms to restructure and liquidate real estate projects through fund establishment.

The securities industry has extended the KRW 1.8 trillion securities company guaranteed PF-ABCP purchase program, which has been self-funded and operated since the end of 2022, until the end of February next year. Liquidity backup measures related to PF-ABCP are being maintained.

Comprehensive financial investment business operators have injected KRW 450 billion to supplement the liquidity of securities company PF-ABCPs, contributing to the stabilization of the short-term funding market. The interest rate on securities company-issued PF-ABCP has decreased and stabilized from 7.48% in December 2022 to 4.78% in December 2023, and 3.87% in July this year. It is expected to continue serving as a sufficient backup measure for the short-term funding market.

Cheon Seong-dae, Head of Securities and Futures Division at the Korea Financial Investment Association, said, "It is meaningful that the securities industry is making voluntary efforts in line with the government’s real estate PF market stabilization policy," adding, "We will continue to strive for the stabilization of the real estate PF market."

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