The Financial Services Commission (FSC) has decided to support the refinancing of primary collateralized bond obligations (P-CBOs) for companies affected by the Iran war. The government will also increase liquidity support through policy financial institutions by 2.5 trillion won.
The FSC held a meeting on Monday between the industrial and financial sectors on industries affected by the Middle East situation, announcing it would ease the burden of P-CBO refinancing for struggling small and mid-sized enterprises.
P-CBOs are a system in which the Korea Credit Guarantee Fund provides guarantees to help companies that have difficulty issuing corporate bonds on their own to raise funds through bond issuance. The authorities will lower the minimum repayment ratio for refinancing from 10% to 5% and reduce the spread by up to 0.13 percentage points. The subordinated tranche acquisition ratio will also be reduced by up to 0.02 percentage points.
The FSC estimated that P-CBOs worth approximately 900 billion won could benefit from the measures. Of this amount, petrochemical companies account for about 170 billion won.
The total size of new funding programs through policy financial institutions will also be expanded to 26.8 trillion won. The government had previously announced at an emergency economic review meeting last month that it would supply 24.3 trillion won to Middle East export-import companies and their partners through the Korea Credit Guarantee Fund, the Korea Development Bank (KDB), and the Industrial Bank of Korea, among others. An additional 2.5 trillion won will be added through a supplementary budget to be drawn up this month. "A total of 53 trillion won-plus in funding is being supplied, centered on the five major financial holding groups," an FSC official said. "In March alone, policy and private-sector financing provided more than 10.7 trillion won to companies affected by the Middle East situation."
KDB and the Export-Import Bank of Korea are discussing cooperative measures to bolster liquidity at the Korea National Oil Corporation. The sixth Corporate Restructuring Innovation Fund, worth 1 trillion won to support industrial restructuring including the petrochemical sector, will also begin investing this month. Representatives from Lotte Chemical, HD Hyundai Chemical, Hanwha Solutions, DL Chemical, GS Caltex, and SK Innovation attended the meeting.