Record Korea Budget to Help Fund Corporate Bond-buying

Source: Regulation Asia Editors, Regulation Asia 2020-07-08

The supplementary budget will cover a 1tr won capital injection for an SPV that will purchase low-rated corporate bonds and commercial paper.

South Korea's National Assembly passed a KRW 35.1 trillion (USD 29.2 billion) supplementary budget on Friday (3 July) to aid the economic recovery, the third such budget the year and the largest on record, mostly aimed at supporting jobs.

The FSC (Financial Services Commission) said on Tuesday (7 July) that more than KRW 4.7 trillion in resources has become available to support businesses, including KRW 50 billion for KAMCO’s corporate asset purchase programme.

The funding will also cover a KRW 1 trillion capital injection for a special purpose vehicle that will purchase corporate bonds rated AA to BB, commercial paper rated A1 to A3, and junk-rated bonds which have been recently downgraded due to Covid-19.

The SPV will launch later this month to prevent sell-offs of corporate assets.

The government is also preparing a programme to help vulnerable businesses improve their financial structures through restructuring, the FSC said.

A consultative group comprising businesses, investors, lenders and other experts is currently being set up enhance the effectiveness of Korea’s corporate restructuring system.

As of 3 July, a total KRW 153 trillion in loans, guarantees and related extensions were provided by financial institutions to SMEs that have been hit by the Covid-19 pandemic.

South Korea’s National Assembly

Record Korea Budget to Help Fund Corporate Bond-buying

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