Opinion conveyed that ‘additional consultation is necessary’… Ministry of Land, Infrastructure and Transport “Promotes bond issuance after consultation”
HUG capital is falling due to lease fraud… If there is no expansion, there is a risk of warranty subscription being discontinued.
Seoul Apartments
(Seoul = Yonhap News) Reporter Shin Hyun-woo = The photo shows an apartment complex seen from Namsan in Seoul on this day. 2022.11.15 [email protected]
(Seoul = Yonhap News) Reporter Park Chorong Lee Yul = The bond issuance schedule for the Housing and Urban Guarantee Corporation (HUG) to expand its capital was suddenly halted.
It appears that the financial authorities have put the brakes on the capital expansion of HUG, which operates a jeonse deposit return guarantee, due to concerns that it could be interpreted as a signal to expand jeonse loans.
According to the Ministry of Land, Infrastructure and Transport on the 29th, HUG suspended procedures for issuing bonds (new types of capital securities) worth up to 700 billion won.
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HUG submitted a securities report to the financial authorities the day before and planned to forecast demand for institutional investors that day.
However, the bond issuance work was halted as the financial authorities conveyed the opinion that ‘additional consultation with related ministries is necessary.’
A HUG official said, “We are only being told that additional consultations are necessary, so we are investigating the reason for suspending the procedure.”
An official from the Ministry of Land, Infrastructure and Transport said, “We are requesting that the need to issue new types of capital securities be supplemented in more detail,” and added, “After supplementation, we will pursue bond issuance in consultation with financial authorities.”
An official from the financial authorities said, “It is very unusual for a public institution to expand capital through new types of capital securities, so we are discussing it to check whether there are any problems with investor protection.” He added, “Discussions may take a few days or a week.” .
The reason HUG started issuing new types of capital securities is because guarantee accidents continue to occur due to lease fraud, etc., and losses continue to increase.
The amount of subrogation that arises in the process of HUG returning rent to tenants instead of landlords amounts to 3.022 trillion won from January to September this year alone.
However, the percentage of money recovered by HUG from landlords is only around 8% as of January to August of this year. HUG expects to see a deficit of 3 trillion won this year, similar to last year.
The problem is that since the HUG’s guarantee limit is linked to the capital, if the capital decreases due to accumulated losses, subscription to the lease guarantee may be discontinued.
HUG’s guarantee limit was 70 times the capital, but the law was revised last year to increase it to 90 times, and the legal capital was also expanded from 5 trillion won to 10 trillion won.
Nevertheless, as the aftermath of the jeonse fraud and tin-jeon deposit continued, HUG was pushing for the issuance of new types of capital securities. Hybrid securities have a long maturity of more than 30 years, so although they are liabilities, they have the characteristics of capital.
HUG’s position is that capital expansion is necessary within this year in order to maintain stable lease and rental guarantees.
If the policy directions of the financial authorities and the Ministry of Land, Infrastructure and Transport regarding jeonse guarantees and household loans diverge, the damage may fall on the working class who need to sign up for jeonse guarantees.
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2024/10/29 22:23 Sent
