Construction companies after capital increase and loan of guarantees
Securities firms also buy bonds
The “accountability theory” which has enjoyed a booming low interest rate
The liquidity crisis caused by the narrowness of the money market is becoming a reality centered on construction companies and securities firms. With the cooling of the real estate project financing (PF) market, it has become difficult for construction companies to raise funds, and there are numerous examples of this. It is emphasized that the construction sector, which has enjoyed a huge boom since the outbreak of the 19 Crown, or the securities firms that have significantly expanded PF loans are not exempt from liability.
According to the construction industry on the 23rd, Lotte E&C decided to issue a capital increase of 200 billion won to Lotte Chemical and Hotel Lotte on the 18th and decided to borrow 500 billion won from Lotte Chemical on the 20th. that Lotte E&C pursues the financing of over 1 trillion won through general loans and collateralized loans. It is interpreted as a move by Lotte E&C to meet PF ABCP of 3.1 trillion won, which is expected to be achieved by this year. Taeyoung E&C also decided on the 20th to guarantee the debt of part (96 billion won) of the debt (250 billion won) of its subsidiary Gunpo Complex Development PV. This is an agreement to supplement the funds for the loan of the cost of the client’s project (debt acquisition in the event of default) in relation to the complex development project of the Gunpo Station in which the contractor participates.
The liquidity risk of securities firms is also increasing due to the financial difficulties of the construction market. According to Nice Credit Ratings, between PF ABCP and ABSTB, which are guaranteed to be purchased by securities firms or have credit enhancements, the size of asset-backed securities maturing this month is approximately 6.6 trillion won and approximately 10.7 trillion won of maturities will arrive next month. If the liquidity crisis continues, it is very likely that small and medium-sized securities firms with large PF loans will take a hit.
Korea Investment & Securities Co., Ltd. purchased the full amount of the First Asset-Backed Commercial Paper (ABCP) worth approximately 40 billion won, which matured on the 18th. The first loan began in October 2017 and Jeollabuk-do’s Wanju-gun office provided credit enhancement, but investors refused to refinance it, so Hantoo Securities, the host, bought it with their own funds.
Kyobo Securities also directly acquired B.Rich’s ABCP, valued at 56.5 billion won, maturing on the 12th, and issued a 3-month ABSTB bond.
The government announced that it would resume bond purchases with 1.6 trillion won of the bond market stabilization fund, set up to stabilize the paralyzed money market, and that it would promptly implement a capital call (call for funds). However, as the current “crisis theory” is limited to securities firms that have significantly increased PF loans during a period of increased liquidity, there is also criticism that individual companies have to solve the problem on their own. . According to Nice Rating Information, the outstanding balance of PF-backed securities due to credit enhancement by securities firms more than tripled from 14.5 trillion won in the first half of 2018 to 46 trillion won in the first. half of this year.
