Chaean Fund Begins Market Purchases "Unable to Offer Better Terms Than Market for Corporate Bonds"

Lotte Food Participates in Corporate Bond Demand Forecast, Partially Awarded
Support Planned via Yeonjeon Bonds, ChaAn Fund, P-CBO, etc.
"Deemed Difficult to Offer Better Terms than Market"

[Asia Economy Reporter Kangwook Cho] The Corporate Bond Market Stabilization Fund (CBMSF) has officially started purchasing corporate bonds. However, it appears difficult to apply better conditions than the market when purchasing specialized credit finance company bonds (yeojeonchae).

On the 7th, the Financial Services Commission announced in a press release on the 'Current Status of Financial Sector Response to COVID-19' that it officially began market purchases by participating in the demand forecast for corporate bonds of Company A the previous day and winning a portion of the volume.

Company A is known to be Lotte Food. The CBMSF participated in Lotte Food's corporate bond demand forecast the previous day, won a portion of the volume, and began full-scale purchasing operations. The issuance interest rate for Lotte Food's corporate bonds (KRW 100 billion) was set at a level 30 basis points (1bp = 0.01 percentage points) higher than the rate announced by private rating agencies, and issuance is scheduled for the 13th.

The Financial Services Commission stated that on the 1st, the first installment of KRW 3 trillion from financial companies contributing to the CBMSF was completed. However, Citibank, a foreign bank, is facing difficulties in paying the CBMSF contribution fee (about KRW 40 billion) due to the Volcker Rule regulations imposed by the U.S. financial authorities where its headquarters are located. Accordingly, Citibank expressed its intention to propose liquidity support measures equivalent to its CBMSF contribution and to implement them in consultation with other contributing financial companies, the Financial Services Commission explained.

Regarding the purchase of specialized credit finance company bonds (yeojeonchae), the Financial Services Commission stated that support will be provided through the CBMSF and P-CBOs considering the target amounts for principal and interest repayment deferral proposed by the specialized credit finance companies.

However, it reiterated that, as previously stated several times, it is judged difficult to offer better issuance conditions such as interest rates than the market.