Korean govt to expand state guarantees to display, shipbuilding and petro debt issues

2020.01.15 14:36:31 | 2020.01.15 14:37:40

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The South Korean government will provide 1 trillion won ($863 million) in guarantees for debt issues by small- and mid-sized shipbuilders, display makers and petrochemical companies in the form of primary collateralized bond obligations (CBOs) to help them raise funds in cheaper rates.

The Financial Services Commission is drawing up a measure to expand the scope of the P-CBO program currently entitled to small auto parts makers to include shipbuilding, display and petrochemical sectors suffering from the protracted slowdown.

The P-CBO is a financial support program adopted in 2000 in Korea to upgrade issues by small companies with low credit ratings to AAA investment grade through payment guarantee from the Korea Credit Guarantee Fund. The program supported venture companies in 2001 following the bursting of the venture bubble, builders in 2013 amid the real estate market recession and auto components providers in 2019 amid the industry slowdown.

The program will help firms to raise large-scale funds for a long term with fixed rates. Under the program, mid-sized companies can raise up to 25 billion won ($21.6 million) by issuing P-CBOs and small firms 15 billion won, significantly higher than 3 billion won limit for other companies. An official from the Financial Services Commission said the companies could begin to offer the P-CBOs within the first quarter.

By Choi Seung-jin and Choi Mira

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