Korea Credit Guarantee Fund (KODIT) will issue 1.6 trillion won ($1.3 billion) in asset-backed securities (ABS) over the next two months to back state efforts to support companies survive coronavirus fallouts.
The issues will be part of 8.4 trillion won worth issues that the institution has planned for this year.
KODIT runs credit guarantee services through which small- and medium-sized companies can raise funds in the financial market with backings from the state institution. Under the credit guarantee program, KODIT purchases bonds issued by individual companies through a special purpose company and issues securities with corporate bonds as underlying assets.
The debt, securitized by corporate bonds, would be in senior-subordinate structures. The senior tranche is sold to institutional investors with guarantees by KODIT, while subordinated tranche goes to companies without KODIT’s guarantee.
KODIT has channeled 1.2 trillion won into companies through the credit guarantee services from March to May. It plans to supply over 1 trillion won this month.
Bond offerings by companies, excluding financial institutions and state entities, reached 21 trillion won by the end of May. The total issue volume is about the same as those sold during the same period last year but offerings of investment-grade corporate bonds, rated AA or higher jumped 23.5 percent on year while issuance of those rated BBB or below fell 61.0 percent compared to a year earlier to suggest liquidity shortage at poor-rated companies.
By Han Sang-heon and Cho Jeehyun
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