Jungjingong's 'Scale-Up Finance' Supports 1.7 Trillion Won in Corporate Bond Issuance... A Stepping Stone for Growth into Mid-Sized Companies

Support for Corporate Bond Issuance Reaches 1.6622 Trillion Won
487.4 Billion Won in Fiscal Budget Invested to Acquire Junior Tranches

The 'Scale-Up Finance' program of the Korea SMEs and Startups Agency (Jungjingong) is serving as a stepping stone for outstanding small and medium-sized enterprises (SMEs) to grow into mid-sized companies. This initiative has enabled SMEs, which find it difficult to issue corporate bonds on their own credit, to raise funds through the direct finance market, thereby encouraging their 'scale-up.' To date, the total amount of corporate bonds issued with support from this program has reached 1.7 trillion won.

According to Jungjingong on July 1, a cumulative total of 1.6622 trillion won in corporate bond issuance has been supported through Scale-Up Finance from 2019 to this year. Around 570 companies have benefited from this support. The program operates by having a Special Purpose Company (SPC) acquire the corporate bonds issued by the supported companies and then issue asset-backed securities (senior, mezzanine, and junior tranches). The senior and mezzanine tranches are sold to the private sector, while Jungjingong and the issuing companies purchase the junior tranches to help with fundraising. In other words, the program combines private capital with government funding to provide large-scale financing for companies' scale-up efforts.

Jungjingong

To this end, Jungjingong invested a total of 487.4 billion won in fiscal budget through last year to acquire junior tranches and attract private capital. Junior tranches, which have a lower repayment priority in the event of default, serve to reduce the risk of loss for senior investors, thereby increasing the incentive for private financial institutions to invest. With private investors participating in the acquisition of asset-backed securities, Scale-Up Finance has supplied large-scale funds at more than three times the amount of government investment. This is why the program is credited with not only strengthening the foundation for corporate growth but also revitalizing investment in the private market.

The 'scale-up' effect through fundraising support is also becoming tangible. Jungjingong explained that, among the companies whose bonds matured after receiving Scale-Up Finance support between 2019 and 2021, 25 achieved annual sales of over 100 billion won, and 11 succeeded in initial public offerings (IPOs). For example, Bankware Global, the only core banking solution company in Korea, issued corporate bonds in 2020 and 2023 with support from Scale-Up Finance to invest in new technologies such as artificial intelligence (AI) and blockchain, and to enter new business areas. This enabled the company to secure new overseas markets in Japan, China, and other countries. Based on these achievements, Bankware Global was successfully listed on the KOSDAQ market in August last year.

This year, Jungjingong also supported the issuance of 200 billion won in corporate bonds by 80 promising mid-sized companies with high growth potential. These companies are in their growth stage, with an average annual sales of 63.4 billion won, an average of about 70 employees, and an average business history of 19 years. The average issuance per company was about 2.5 billion won. Kang Seokjin, Chairman of Jungjingong, stated, "This year, we will actively support mid-sized companies so that they can grow into mid-tier and global leading enterprises."