[Asia Economy Reporter Lim Jeong-su] Shinhan Card has securitized the payment amounts from LG Display's purchase-only card usage to raise 70 billion KRW in operating funds.
According to the investment banking (IB) industry on the 1st, Shinhan Card raised 70 billion KRW from a special purpose company (SPC) established under the management of Korea Investment & Securities. Korea Investment & Securities arranged for Shinhan Card to receive future card payments from LG Display through the SPC, and issued a one-year maturity securitized promissory note based on these receivables.
Shinhan Card is reported to plan to use the raised funds for operating capital. While card companies mainly secure operating funds by issuing asset-backed securities (card bonds), securitization of card payments is used as a means to secure operating funds without increasing leverage ratios due to additional borrowing.
Corporate purchase-only cards are credit cards used between business-to-business purchasing companies and suppliers. They were developed as an alternative to the traditional practice of exchanging promissory notes between the two parties during transactions, which caused various side effects. The card company guarantees payment, reducing credit risk, and complements the functional limitations of general corporate cards that can only be used at affiliated merchants.
As the usage of purchase-only cards increases, related securitization is also growing. Card payment amounts from highly creditworthy companies such as LG Display, LG Group, Samsung Group, Hyundai Motor Group, and SK Group are utilized as securitization resources.
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