Korea raises aid for financing real estate projects to $2.1 billion

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(Bloomberg) – South Korea is extending support to its beleaguered real estate sector, bringing liquidity in project finance asset-backed commercial paper to a total of 2.8 trillion won ($2.1 billion).

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Support for securities backed by brokerage firms will be increased to 1.8 trillion won from 450 billion won and the Korea Development Bank-led program will allocate 1 trillion won to those backed by construction companies, it said. the Financial Services Commission on Friday.

The news is the latest in a series of moves by Korean officials over the past fortnight to tackle the credit crunch after a developer default pushed yields on short-term debt to record lows. not seen since the global financial crisis.

Yet despite news of new steps being announced almost daily – including a 50 trillion won relief package – yields on treasury bills have continued to climb. Yields on 3-month commercial paper rose 4 basis points on Friday to 5.13%.

“Compared to the corporate bond market, it has been assessed that the difficulties in the short-term capital market are still relevant,” said the FSC, the country’s financial regulator, in a statement. . Additional measures were rolled out as asset-backed securities for project finance and commercial paper “are the weakest link in the short-term money market”.

Adding to the strains in the credit market, a South Korean insurer prompted a sell-off of perpetual bonds across Asia with the decision to forgo prepayment. He reversed course this week.

The heads of 20 Korean lenders, including Hana Bank, Kookmin Bank, Nonghyup Bank, Shinhan Bank and Woori Bank, said they would buy commercial paper and asset-backed CPs and cooperate to maintain credit lines for companies non-bank financials.

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