Expansion of Support Scope Including Relaxation of Credit Rating Requirements
The Korea Development Bank (KDB) headquarters in Yeouido, Seoul, shows a quiet scene on the 20th, which General Motors (GM) headquarters referred to as the 'deadline' for Korea GM's court receivership. KDB is the second-largest shareholder, holding 17% of Korea GM's shares. However, out of the 10 board members, KDB only holds 3 seats, making it difficult to prevent GM headquarters from pushing forward with court receivership. Lee Dong-geol, chairman of KDB, stated that if GM headquarters unilaterally places Korea GM under court receivership, they will take legal actions such as lawsuits. Photo by Moon Honam munonam@
[Asia Economy Reporter Jin-ho Kim] The Korea Development Bank announced on the 7th that it will revamp its corporate bond and CP refinancing support program worth 4.4 trillion KRW for low-credit rating companies whose credit ratings are highly likely to decline due to COVID-19 damage. This is a measure in line with the government's financial market stabilization plan related to COVID-19.
The program, established with a total of 4.4 trillion KRW including 1.9 trillion KRW for corporate bond refinancing support and 2.5 trillion KRW for CP refinancing support, was evaluated by the bank as having contributed to stabilizing the corporate bond and CP markets by responding quickly to market anxiety spread during the early stages of the COVID-19 outbreak.
Since the launch of the Special Purpose Vehicle (SPV) for corporate liquidity support, the bank has been operating bond market stabilization policy programs centered on the SPV. However, as the COVID-19 crisis phase is still ongoing, the revamp plan was prepared to complement the blind spots in SPV support and proactively respond to potential capital market instability in emergencies.
Publicly offered corporate bonds will be included in the support targets not only for refinancing issuance but also for new issuance. The credit rating requirements for corporate bonds and CP will be relaxed to strengthen support for low-credit rating companies whose credit ratings are highly likely to decline due to COVID-19 damage. The conditions were eased from a minimum of A grade to BBB grade or higher for corporate bonds, and from A2 grade to A3 grade or higher for CP.
Additionally, privately placed corporate bonds for the purpose of refinancing CP or publicly offered corporate bonds will be added to the support targets to alleviate companies' repayment burdens caused by the SPV's CP support period limitation and to support corporate bond issuance by low-credit rating companies that find it difficult to use the public market. The plan also aims to complement support limitations for affiliates that have a high proportion of capital market financing but face difficulties in additional corporate bond and CP issuance due to the SPV's affiliate-specific support limit of 300 billion KRW.
A bank official said, "With this revamp, we expect to be able to quickly respond to crisis situations in case of bond market deterioration, stabilize the capital market, and support companies in overcoming COVID-19."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
